Apple To Turn iPhone Into A Virtual Credit Card

Reports are making rounds that Apple is planning to include NFC (Near Field Communication) in the upcoming release of iPad 2 and iPhone 5. NFC technology allows devices to communicate with each other, once they are in proximity "i.e. upto 4 inches to each other". The purpose of this move is to convert iPads and iPhones into electronic wallets or virtual credit cards, thereby allowing customers to just wave their devices near checkout counters and make payments.

iphone-terminal Reports are making rounds that Apple is planning to include NFC (Near Field Communication) in the upcoming release of iPad 2 and iPhone 5. NFC technology allows devices to communicate with each other, once they are in proximity “i.e. upto 4 inches to each other”. The purpose of this move is to convert iPads and iPhones into electronic wallets or virtual credit cards, thereby allowing customers to just wave their devices near checkout counters and make payments.

Richard Doherty, director of the consulting firm Envisioneering Group, informed Bloomberg that:

The [electronic wallet] services are based on “Near-Field Communication,” a technology that can beam and receive information at a distance of up to 4 inches, due to be embedded in the next iteration of the iPhone for AT&T Inc. and the iPad 2, Doherty said. Both products are likely to be introduced this year, he said, citing engineers who are working on hardware for the Apple project.

Doherty also pointed out that Apple could start a mobile payment service as early as mid-2011. It would revamp iTunes, a service that lets consumers buy digital movies and music, so it would hold not only users’ credit-card account information but also loyalty credits and points.

It is worth noting here that, Google’s Android, as well as Samsung Electronics Co.’s Nexus S, and Nokia’s Oyj already support NFC technology. So Apple is clearly late to the party on this one. In fact Nokia has been supporting the technology for years now, but the technology has proved to be slow to take off. However, Apple’s arrival to the space might just be the boost that this technology needs.

Apple’s main objective with this move is to be able to get a piece of the $6.2 trillion that US consumers spend on buying goods and services each year, according to Richard Crone, head of financial advisory firm Crone Consulting LLC in San Carlos, California. Apple’s advantage here would be that it could tap into credit-card numbers, and other financial details already on files on the iPhones and iPads. Currently iTunes users use credit cards to buy and sell songs and movies from iTunes, and Apple has to pay credit card processing fee on every transaction. By enabling users to directly tap into their own bank accounts and use their mobile devices as credit cards, Apple would be able to save a lot on millions of transactions.

Even if Apple is not able to acquire a sizeable share of the payment services sector, the likely savings to Apple’s own bottom line – could easily make a difference in their overall financial statements.