Enabling Technologies

The Network Effect: NFC Is The New “Internet” Of Payments

When Most Businesses Have It, The World Changes

The network effect is very powerful.  You are using it right now, you just may not see it today, the Internet is the text book example of the network effect in action. The more people who are on the Internet, the more valuable the internet is to each user. This creates a positive externality because a user may be on the Internet without intending to create value for other users.

Apple Does Not Own NFC

The same can be said of NFC.  Apple had the wisdom to choose open standards with Apple Pay: NFC, Tokenization, Secure Element.  This was certainly a shift in the direction the “startup disruption” was heading with closed wallets and little to no API access.  These startups wanted to “own it all”.  Apple chose to own none of it, just own their method and certainly patent many elements of it.

Apple Pay is driving over a 3,000% increase in upgrades on NFC devices all the way from micro-merchants  to national merchants.  This demand is driven organically by these merchants themselves and will soon be driven by Apple Pay users demanding merchants to upgrade.

The NFC upgrade to just about all merchant is $0.  The increased cost to all merchants is $0.  There simply is no reason not to adopt NFC; and thus to adopt Apple Pay.

Apple Did Not Invent NFC

Apple did not invent NFC.  Nor did they invent USB, Touch Screens, The Smart Phone, DVD Drives, SSD Drives, WiFi or any number of technologies.  What Apple does and does very well is popularize technology when and only when it fulfills a purpose.  Today NFC is the technology and Apple Pay is the purpose.

By the end of 2015 90% of the largest merchants will have NFC terminals.  This will form the foundation of the “internet” of payments;  a network of hardware that will be on the payment card devices of most retailers.

This “internet” of payments will become the rich and fertile ground for innovation and expansion.  To the astute startup and the wise legacy company the opportunities are limitless.   To Google, MCX, Softcard, Square, PayPal and everyone else, you snooze you lose.

To MCX in particular, it is 1997 and you are on the AOL side of things and the Internet is exploding.  Do you really not want to support the “internet” of payments, NFC?  You perhaps may choose not to support Apple Pay because of the desire to “hurt” Visa, but the technology winds have shifted to NFC.

What Can You Do With NFC?

Apple Pay will not be the only thing that uses this new “internet” of payments, but it will be, rightly so, the first product to become famous using it, inspiring it and shaping it.  Apple Pay will be astoundingly successful by any measure.  But so will other systems.  Hidden in the garage someplace in this world is the creative mind that will see this opportunity, and come up with an as yet unimagined innovation.

One may see the world of the half empty glass because Apple “controls”  the wallet.  This is so very wrong.  The world is of the half full glass and you and your dreams and visions may see the same things I see with the network effect taking hold and building a retail payments, “internet”.

What will you build on this foundation, this new “internet”or keep building buggy whips?

Brian Roemmele

Brian Roemmele, is a mobile payments expert and an avid blogger at Quora. His profile can be found at http://www.quora.com/Brian-Roemmele. Brian is an Apple enthusiast and has deep interests in writing about new technology in payments.

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