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How the iPhone 5 Failed to Kick-Start a Consumer Revolution

by on September 17, 2012

iPhone 5 Failed to Kick-Start a Consumer Revolution

The moment everyone has been waiting for has finally arrived. After months of anxious speculation, unconfirmed leaks and dubious lawsuits, the iPhone 5 is here. Pre-orders have already begun rolling in, and the newest iPhone will hit stores on September 21. But for all the fanfare Apple’s newest darling is receiving, we can only see the iPhone 5 as a missed chance at revolution.

Let us elaborate. The iPhone has several new features to offer consumers. It’s both larger and thinner than its predecessors. Its processor is twice as fast as that of the iPhone 4S, and the phone is finally able to work on the 4G networks that high-end Android phones have been using for the past year. The rear video camera has been upgraded to shoot in 720 HD, and the standard camera now has a panoramic option. Apple has ditched Google maps in favor of its own exclusive maps. On top of that, Siri has grown a little smarter. She can give you scores for sports games, post status updates to your social network and do a few other tricks.

But the one feature that we were really hoping for – the one feature that could have easily revolutionized the market – is nowhere to be found inside the iPhone5’s sleek aluminum body. We’re talking, of course, about an NFC chip.

In case you haven’t been following our blog, NFC stands for Near Field Communications. These tiny radio chips allow smart phones to securely transmit sensitive data to receivers from a few feet away, and they’re essential to the mainstream success of mobile payments. But while phones like the Samsung Galaxy Nexus and the HTC Evo already use NFC chips, Apple has decided to leave the technology out of the newest iPhone.

The impact of the company’s decision is tremendous. Phone-based payments have been on the verge of a global breakthrough for the last two years or so. As Starbucks has proven, the hardware to cheaply and securely process these transactions already exists. Recently, the coffee franchise placed Square mobile processors in thousands of stores around the country. The only thing holding back mobile payments from going truly mainstream and appearing in stores like Wal-Mart and Kroger’s is a lack of consumer awareness. Not enough people know about it. Not enough people know what to do with it.

At the moment, relatively few consumers own smart phones with NFC capabilities. According to Berg Insight, the NFC phone market is valued at less than a tenth of its potential. The iPhone 5 could have changed all of that. The phone will undoubtedly be the hottest item on the mobile market for the next few business quarters, and experts predict that more than 10 million units will be sold by the end of the September alone.

By incorporating an NFC chip into the iPhone 5, Apple could have given the mobile payments industry the boost it needed to go mainstream. Instead, consumers will have to hang on to their plastic credit cards a little longer. The mobile payments revolution is still on the horizon – according to Juniper Research, the market for mobile payments is expected to exceed $1.3 trillion by 2016 – but it won’t arrive as quickly as as many had hoped.

Apple hasn’t given a clear reason for eschewing NFC on the iPhone 5. If we had to guess, though, it’s that the company knows it can make a mint by re-releasing the 5 in a few months with an embedded NFC chip. Maybe they’ll call it the 5S, or something similar. But for now, buying a cup of coffee without scanning one of those annoying QR codes is just a dream. How frustrating.

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