Apple has launched its new iPhone 5 product with 4G functionality, giving it faster speeds, and a taller 4 inch screen enabling an extra row of apps to be squeezed on to its home screen. There is, however, no near field communication (NFC) chip to let it process contactless payments, disappointing the financial services sector who had hoped for an extra push for a technology that it is keen on to replace expensive cash handling.
In his first full product launch since the death of Apple visionary Steve Jobs, the new chief executive Tim Cook described the iPhone 5 as “thinner, lighter, faster”, and added that Apple “had never been stronger”. A fact borne out by Apple’s present market capitalisation of US$620bn, with the iPhone accounting for a large chunk of that and predictions that the latest iteration of the smartphone could even boost GDP in the US; reflecting its mass market appeal.
There are no big new ‘wow’ features such as the Siri voice recognition software, as unveiled in the previous iPhone 4S launch, but the 5 does come with a bigger screen package to better combat Samsung’s Galaxy SIII and other rivals, such as the recently announced Nokia Lumina 920, which comes with the Windows Phone 8 operating system (OS) and NFC capability. Samsung is currently facing a possible US$1bn fine, of course, for patent infringement of Apple's designs, although it is appealing and counter-suing in the on-going patent wars in the smartphone sector, and has already shifted some 20 million Galaxy III units in western Europe alone, using the open Google Android OS that is increasingly challenging Apple's proprietary iOS. The updated iOS 6 software with its integrated Passbook feature, which was first unveiled in June and is focused on geo-location and ticketing end uses for the consumer, will attempt to allow the iPhone 5 to better compete.
The iPhone 5 also has a new iMessage function that apes the BlackBerry Messenger (BBM) platform and is compatible with all iPhones going back to 2009. A new ‘lightning’ connector for charging purposes was also unveiled, but it doesn't allow wireless charging like the Nokia Lumina 920, and it means all the old iPhone plugs are immediately obsolete or an adaptor will be needed. Updated iTunes software will, from October, introduce enhanced cloud computing performance, allowing users to pause music, film or TV on one Apple device and then resume on another device, such as an iPad.
The iPhone 5 launch in the US will be followed by its availability in the UK on 21 September, with a rollout programme flowing on around the world ahead of the Christmas sales. The research firm IDC is already predicting sales of 51m units in the run up to the holidays. The handset will cost from £529 upwards, depending on if the 15GB, 32GB or 64GB memory is specified.
In the UK the biggest mobile network operator (MNO), recently renamed EE as it dropped the terrible Everything Everywhere moniker as it rolled out a 4th Generation service this week, will effectively be the launch partner for the iPhone 5 because it is the only UK MNO presently offering a 4G service before Christmas 2012.
The lack of NFC functionality, enabling contactless mobile payments (MCP), has caused the most comment in the financial services sector with many banks hoping to attract extra payments business via Apple’s encouragement and lots of MNOs, such Orange and the O2 Money unit in the UK, targeting this arena, alongside Google, Isis and others. Apple it appears is concentrating first on the loyalty schemes, customer engagement and m-commerce arena first, before perhaps rolling out payments later once consumers have got used to using their smartphones at the Point of Sale (PoS).
Rivals too, such as the Google Wallet or Isis platform are targeting this market, but are also trying to persuade consumers to purchase goods simultaneously, without huge uptake figures so far, so perhaps Apple’s plan to get customers used to using their phones at the PoS first is wise.
Gilles Ubaghs, an analyst with Datamonitor, has been examining this area ahead of the research firm’s upcoming report entitled ‘Mobile Payments: Ringing the Changes’, and is convinced that, “once these habits become more established, moving into payment behaviour should be relatively easy, in theory.
“Apple already holds more payment details than giants such as Amazon, and the fact this [Passbook] feature is part of a wider iOS update means it will be available not only to iPhone5 owners, but also the millions of other iPhone and iPad users already on the market. With such as established user base and millions of avid followers, this will likely prove to be a boon in attracting banks to work with the platform once Apple opens up the platform to payments and all the other pieces needed for payments gradually come into place.
“The move also gives greater emphasis to the emerging area of cloud based mobile wallet payments, which do not necessarily rely on NFC technology,” adds Ubaghs. “The expectation that all mobile proximity payments will be conducted through NFC is increasingly under threat from device independent cloud based services, such as PayPal and Pay with Square. In this model the secure payment information is held in the Cloud, rather than centrally on the handheld device.
“The lack of NFC on the iPhone 5, by no means implies that Apple is not looking at the technology or that it is not interested in payments. If anything it perhaps only confirms its wider intentions of building a full eco-system with an established user base, before it tries to launch a payment specific service. In an increasingly crowded mobile payments landscape, Apple’s go slow, nearly silent approach may ultimately make the biggest noise of all.”