Will Apple be changing the world again?

Apple may not be as magical as it was a few years ago but the announcement of its new products is still a big event in the mobile industry. While the newly released iPhones may look like a fashion accessory rather than an innovative electronic device, there are still a few things under the hood that are worth looking at. In the world of mobile payments, it is the iBeacon technology that is of particular interest, writes Denis Margolin

Apple may not be as magical as it was a few years ago but the announcement of its new products is still a big event in the mobile industry. While the newly released iPhones may look like a fashion accessory rather than an innovative electronic device, there are still a few things under the hood that are worth looking at. In the world of mobile payments, it is the iBeacon technology that is of particular interest, writes Denis Margolin

In a nutshell, iBeacons is Apple’s solution for contactless payments via the smartphone that is also able to provide the interesting indoor mapping option that would, theoretically, be attractive for the brick and mortar stores. Based on Apple’s ‘game-changer’ reputation, or even a disruptor in many markets (digital music, smartphones, tablets, etc), it is a hope of many that contactless payments will finally take off with Apple at the helm.

The current contender for the contactless technology solution is NFC, for near-field communication. This technology is not new, and basically relies on the same principle as ubiquitous RFID labels, which are widely used in the retail industry. NFC started as early as 2002 and the first phone to implement the technology was released in 2006. Ever since, NFC has set high prospects in the industry. It was expected to turn the micropayment space around, make it smarter and easier and, of course, make smartphones even more necessary in our day-to-day lives.

NFC trials were carried out in 2007 in different parts of the world. The findings weren’t too promising with the trials identifying numerous obstacles that hampered the adoption of this method. The lack of infrastructure was one of the main issues. Retailers, in the first place, would need to have access to NFC-enabled terminals, which in itself involves a significant investment. The relatively low use of such mobile phones and the lack of wider standardisation meant that there was simply no one willing to invest money on this. A lack of infrastructural resources also meant there was simply no point for the customer in even looking at NFC, given multiple existing ways to make a payment. All in all, the market share of NFC-enabled phones did not quite increase.

This is the classical chicken and egg paradox, a vicious circle with no way out – unless someone is willing to inject a remarkable amount of funding to roll out this payment system. A lot has been expected since 2007 in this field, and further talks took place during 2012 across Europe and Asia, but NFC payments are yet to take shape.

Apple’s incursion into the contactless payments market is expected to speed up the process and create competition in the space. However, the outcome will be quite different: the release of iBeacons will mean we are even further from adoption contactless payments than ever.

Yes, Apple is a great game-changer. They would prepare meticulously behind the scene, in secrecy, forming the pacts with everyone who is important in the industry and then when everything is ready they would ride to the market with all the king’s horses and all the king’s men, trumping their horns and shamelessly waving their banners and there would be nothing to stop them – because everyone is already their ally. That’s how it was with iTunes, with its App store, and the same thing happened with iBooks.

But the current scenario seems to be different. US-based retailers have not declared to be supporting this initiative, so it looks like Apple is hoping to lead in this process with its own brand. Here comes the trouble.

Retailers have now two payment systems to choose from, but it doesn’t look like there’s transparency around the industry standards in this space. Before so much uncertainty, the wisest thing to do will be waiting while the murky waters clear and wait until it becomes obvious who the winner is.

This is reminiscent of the famous BluRay vs HD-DVD standoff: enormous resources and time spend on the market war and, by the time the war was over, BluRay had established itself as the market leader. Albeit, already being obsolete technology. Flash drives and over-the-air delivery took most of the niches it was targeting – a "pyrrhic victory" is the right expression to describe what happened. This might well be what eventually happens with contactless payments. Apple, Sony and Phillips will spend quite a lot of time fighting each other to convince the market that their standard will prevail. The market will wait for the dust to settle. And it could well be that by the time that happens , both fighters are already worth nothing as something new and better emerges.