Will Apple Partner Visa, Mastercard for NFC Mobile Payment? - Analyst Blog

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Reportedly, Apple ( AAPL ) will collaborate with major payment networks, banks and retailers including the likes of American Express ( AXP ), Visa ( V ) and Mastercard ( MA ) to offer mobile payment system in its upcoming iPhone 6.

Apple is likely to unveil its new iPhone 6 at an event scheduled to take place on Sep 9. Per Bloomberg, the new iPhone is expected to include a near-field communication (NFC) chip which coupled with Touch ID and a fingerprint recognition reader, is expected to make mobile payments easier for users.

Reportedly, Dutch chipmaker NXP Semiconductors NV will supply the NFC chips that will enable iPhone users to pay through touch. We believe that Apple's adoption of the technology will boost NFC's popularity in the long run.

Near-field communication or NFC refers to a short-range high frequency wireless communication technology that enables the exchange of data between devices. The NFC technology is convenient and can be used even when the device is switched-off. The technology also enables smartphones to be paired with other devices like headphones simply by placing the phone in close proximity to compatible devices.

To date, the NFC technology has been used by companies like Nokia, Samsung, Blackberry and Sony in various handsets.

Since the inception of the technology Apple had refrained from using it. The company was not willing to bear the extra cost and engineering effort involved in embedding NFC chips. Moreover, many retailers did not have NFC-enabled payment terminals, which is a pre-requisite for the smooth functioning of the technology.

We believe that Apple's adoption of NFC is intended to combat fierce competition from the likes of Samsung, which has been using the technology to get an edge. Apple's new mobile payments system will be a befitting reply to rival Google's ( GOOGL ) Google Wallet, wireless carrier-backed Isis and eBay's ( EBAY ) PayPal and it will help the company to enhance its market share.

However, many retailers do not have the costly point-of-sale (PoS) systems in their outlets, which will make them incapable of carrying out such a transaction. Hence, retailers may continue to favor SMS or WAP based payment systems instead of NFC, which will hinder the smooth adoption of the technology.

Further, this technology will make devices more prone to virus attacks. Apple will thus have to take adequate precautions against these too.

We believe that if Apple intends to create a truly comprehensive substitute for traditional credit cards then it will have to tie up with more retailers and banks. If the rumors turn out to be true, Apple will surely benefit from this partnership in the long run.

Currently, Apple has a Zacks Rank #3 (Hold).

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MASTERCARD INC (MA): Free Stock Analysis Report

VISA INC-A (V): Free Stock Analysis Report

AMER EXPRESS CO (AXP): Free Stock Analysis Report

APPLE INC (AAPL): Free Stock Analysis Report

GOOGLE INC-CL A (GOOGL): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Symbols: MA , V , AXP , AAPL , GOOGL

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