Did Apple Kill NFC?

What's Next In Payments®
1:39 PM EDT June 20th, 2013

Welcome to the latest edition of PYMNTS.com’s VC Voices: a weekly column where we bring you commentary from the best of the best around the world of payments investment. Want to know what the biggest backers of our industry’s innovators and disrupters think? We give our VCs 500 words of unedited space to do with as they please, so you’ve come to the right place.

This week, we’re joined again by Matt Witheiler, principal at Flybridge Capital Partners. Matt gives us his take on Apple’s NFC apathy and what it means as for NFC’s future as a payments tool. 

By Matt Witheiler, Principal, Flybridge Capital Partners

After years (and years, and years) of debate, I’m finally calling this one: NFC, at least for payments, is officially dead.  For a technology that has been “around the corner” for what seems like a decade, Apple’s iOS 7 unveiling at WWDC last week was the final chapter in the NFC book for me.  Sure, Tim Cook didn’t outwardly come out and say that the next iPhone would not have NFC, but he said as much with the announcement of AirDrop.  For those not familiar, AirDrop is a new feature of the latest version of the iPhone operating system that allows two phones to share content wirelessly.  Think of it as an intuitive version of that NFC-enabled Samsung Galaxy sharing feature they show on TV all the time.  You know, the one where two people awkwardly rub phones together to exchange a picture.  By announcing AirDrop, Apple has more or less come out and said that NFC won’t be in the next iPhone (at least in my opinion).

Why is this relevant?  Because NFC pundits for years have claimed that an Apple entry into the market would herald the era of NFC.  The belief was that Apple was the only phone vendor with enough market share and influence on retailers to actually pull NFC off.  And with 435 million iTunes accounts worldwide, each with a funding mechanism of some sort, there was some truth in this.

The issue is that those who believed Apple would enable an NFC world don’t fully appreciate how Apple normally operates.  Looking at Apple’s history, they tend to be more “polishers” than they are “innovators.” The iPod wasn’t the first MP3 player to market; in fact, more than three years passed and hundreds of thousands of MP3 players were sold before Apple released their take.  Likewise, neither the iPhone, nor the iPad, nor iTunes were the first of their time.  Historically what Apple has done is find a category that has moderate consumer success, bring an elegant consumer experience to that category (the “polishing” I reference above), and sell a bunch of stuff.  Given the little penetration of NFC today, the fact that Apple is not “polishing” the technology is not really a surprise.

With Apple out of the NFC game there is no vendor to shepherd in the dawn of NFC.  And without a shepherd, I fear NFC is destined to find a home in the payments graveyard.

What startup lessons can we garner from the NFC case study?  There are three primary learnings in my mind.  The first is that timing is everything; being too early to a market can be just as disastrous as being too late.  By mistiming a market on the early side an entrepreneur runs the risk of having to evangelize, sell and educate the market all alone.  That can be an expensive and lengthy game.  A second learning in my book is that it’s much harder to be a technology looking for a problem than a problem looking for a technology.  I think one of the reasons NFC has failed to capture merchants or consumers is that the alternatives, be them a swipe of a credit card of the passing of some cash, are fairly sufficient.  Technology for technology’s sake is rarely good enough.  The third is that being in control of your own destiny is superior to counting on the moves of others.  Being dependent on vendors – Apple or any other – is a much tougher place to be than being dependent on no one.

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