Will the world end (or the travel industry survive) without NFC in the new iPhone5?

Apparently so - if you believe what you hear on Twitter and some of the tech press.

The travel sector was among many waiting with baited breath on the announcement as well. After all, we already knew that PassBook was coming after the iOS6 event earlier this year.

Add in some irrational exuberance over the iTravel patents and a dash of "...Apple-needs-to-include-NFC-to-keep-up-with-competitors..." and it was a forgone conclusion that NFC (Near Field Communication) would make its Apple debut on the iPhone5... until it didn’t.

Well in fairness, at least some rightly predicted that NFC was not making the cut (as well as giving some good technical details on how NFC works for the geeks out there).

So really, will the iPhone’s lack of NFC hurt it in the travel or retail context, and by extension it’s sales? Before we answer that, let me introduce a few (pesky) facts:

• NFC is a decade-plus old technology that has yet to catch on as predicted. Yet that has not dissuaded analysts of presenting hockey-stick adoption curves (year after year after year).
• In 2011, NFC-enabled phones were initially forecast to reach 70 million shipments, yet actuals came in under half that amount.

• According to an August 2011 estimate from iSupply, only 31% of all mobile phones or 580 million NFC handsets in 2015
• Analyst firm In-Stat projects 1.2 billion NFC chip shipments in 2015, and forecasts 375 million mobile payment users globally
• Many of those NFC phones were produced by RIM’s Blackberry line. Would anyone look at RIM’s rapidly declining share and say that the NFC is a defining feature of phones people want to actually buy?
• There are numerous NFC-based mobile wallet schemes…Google Wallet, carrier-backed ISIS (like they have our best interests at heart), Visa’s V.me, Amex’s Serve and others. Consumer confusion is rarely the path to accelerated growth.
• The most successful mobile commerce app is arguably Starbuck’s app…and it uses barcodes.

It’s disappointing, but not disastrous

The truth of the matter is that today there are very few places (speaking primarily of the US; European & Asian adoption of smart credit cards is much further along, although not all contactless cards use NFC) that one can actually use NFC.

There is greater adoption in retail outlets though travel and transportation lag much further behind. Again a few statistics are helpful.

• 15% of top 150 US Merchants are equipped with Contactless POS terminals, according VivoTech, a leading contactless mobile payment technology provider
• ABI Research projects 85% of POS terminals will support contactless payment by 2016

That just looks at retail penetration. Let’s look at travel. Today barcode scanners are almost ubiquitous to scan paper boarding passes as well as barcode-driven mobile boarding passes.

That infrastructure will support the current Apple Passbook approach. Conversely, I have not seen one gate or security checkpoint in the US or Europe that works with NFC (they may exist, but I haven’t seen them in my personal experience). In either case, the deployment is far from widespread.

Looking at transit, a February 2012 report from Juniper Research, entitled Mobile Ticketing Evolution states:

Further the report notes:

So again there are other technologies – half of all deployments – that will be in play including mag-stripe and other non-NFC contactless.

But the big picture here is that Apple does not launch new technologies until they have matured to where there are no compromises in usability (eg. the iPhone4S did not ship with LTE (Long Term Evolution). But LTE was introduced in the iPhone5 while still delivering increased battery life, something that the plagued the initial LTE phones).

Similarly, my guess is that Apple realized that the infrastructure for NFC was not mature enough to provide any real value proposition for the consumer that couldn’t be just as easily managed through other means, specifically bar codes for PassBook.

Now some could argue that by not including NFC in the iPhone 5 that Apple has not future-proofed the phone. But look back at the data – significant adoption of NFC isn’t projected to happen for 3-4 years.

And given that mobile phones are being replaced within 18 months, most iPhone 5’s will be replaced long before NFC goes mainstream. And in all likelihood the next (iPhone 5S?) and future iPhones will incorporate NFC.

So, in my view the lack of NFC on the iPhone 5 is not a reason why not to buy the product. It’s only those who think that checking the buzzword box is how you decide which phone to buy.

What do you think? Will you buy/not buy the iPhone because of the lack of NFC chip?

NB:Full FNC and Shopping overview from BBDO and Proximity ShopWork