) will collaborate with major payment networks, banks and retailers
including the likes of American Express (
), Visa (
) and Mastercard (
) 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
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 (
) Google Wallet, wireless carrier-backed Isis and eBay's (
) 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
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).
Want the latest recommendations from Zacks Investment Research?
Today, you can download 7 Best Stocks for the Next 30 Days.
Click to get this free report
MASTERCARD INC (MA): Free Stock Analysis Report
VISA INC-A (V): Free Stock Analysis Report
AMER EXPRESS CO (AXP): Free Stock Analysis
APPLE INC (AAPL): Free Stock Analysis Report
GOOGLE INC-CL A (GOOGL): Free Stock Analysis
To read this article on Zacks.com click here.