iBeacons vs. NFC

Introduction

• With a bunch of the latest hype on Apple’s iPhone pointing at NFC and payments I’m wondering a few things.
• Is Apple going to use NFC for their mobile payments like many think?
• Why wouldn’t Apple use a Bluetooth Low Energy (BLE) solution and leverage iBeacons?
• I think one way to begin to answer that question may be to look at NFC vs. iBeacons in a retail capacity.

iBeacons vs. NFC

• Transmission
  • iBeacons use Bluetooth and NFC use short range radio waves
  • iBeacons have a range of up to 50 meters, with an optimal range of 10 meters. NFC’s range is about 4 centimeters (tap to pay), but in theory could support up to 20cm.
  • Most modern smartphone support Bluetooth LE, but not all smartphones have NFC
  • iBeacons support one-to-many. NFC is one-to-one.
• Power
  • iBeacons require a small amount of power. Can run on a small battery for up to two years.
  • NFC gets power from the device accessing it (tags are passive until tapped).
• Payments
  • Both technologies could be used to facilitate payments
    • NFC is already deployed in many retail payment terminals
    • In theory, iBeacon payments would need a supporting app from the retailer to be installed in order to make a payment.
• Security & Privacy
  • NFCs very short range limits the opportunity of a “man in the middle” attack vector
  • iBeacons can broadcast information (and request it) from a much larger distance.
  • NFC must be “tapped” to allow for transmission giving the user much more awareness of when the communication is activated
  • Location with iBeacons is approximate. NFC would be accurate to centimeters.
  • Both technologies offer the ability for encrypted communication.
  • Apple is reportedly may use “tokenization” as a way to securely handle transactions
    • Replaces the credit card number with a complex code that is only used once per transaction.
    • Not all NFC payment terminals can accept tokenization based payments.
• Design
  • NFC tags can be tiny stickers (like postage stamps) attached to products, etc. iBeacons, because the need a battery and transmitter, are larger, maybe matchbook sized.
• Cost
  • iBeacons are about $20–30 USD a tag. NFC tags cost about $0.10 to $0.60 USD
• Mobile payment experience
  • iBeacons can push offers and information to a device. NFC require customer to “interact” with a tag at locations to get offers and information (extra signage).
  • NFC
    • Customer approaches Point of Sale (POS) terminal
    • Opens digital wallet, “app” on smartphone, maybe enters PIN?
    • Chooses payment “card”
    • Taps device to the payment terminal to complete transaction.
  • iBeacon
    • App detects customers presence as they enter the store and asks if they want to open the app
    • Opened app “checks-in” to the POS system.
    • At checkout the customer says they want to “pay” with their account
    • Their information is displayed on the POS terminal for the clerk to verify. Name, photo, etc.
    • Clerk completes the transaction.
    • iBeacon POS would require new systems to be in place to support it.

Why I think iBeacon over NFC

• Apple likes to push technology forward and “disrupt” existing systems that cause consumer friction
  • NFC requires contact which means still taking out your card or wallet, or phone in this case.
    • Doesn’t change the current way payments are done now
• iBeacons are based on an existing technology available in already deployed smartphones
  • Not all iPhone’s would have NFC. That would required users to get a new device to get the new functionality
  • Apple does like technology that promotes hardware upgrades, but they are also “standards adverse” too.
    • I think they want their own payment technology based on iTunes accounts
    • The payment system is an iTunes account hook, not a hardware hook (although the first naturally could lead to the second).
    • iTunes is already used cross platform
    • Apple would would rapid mass adoption of their new payment system for it to be successful. Tying it to new hardware would slow that down.
• Everyone assumes NFC is more appealing because it’s already supported and rolled out by the payment industry and in other applications, like railway systems, vending machines, etc.
  • Remember, think disruption, not assimilation
  • May require a retailer’s app to be installed to use
    • If Apple does develop a payment system based on iBeacons then they could roll it out at a core level in the OS
    • Basic payment and digital “wallet” at the OS level and then enhanced functionality with the retailers app installed.
  • One challenge Apple would have is getting support from retailers
    • There are already indications that they have been hard at work at that and possibly for years.
      • Apple supposedly already has deals in place with at least Nordstrom’s, McDonald’s, Walgreens, and CVS.
      • Retailers would need to add iBeacons and integrate Apple’s solution at their POS.
        • There have been recent reports that Apple upgraded their in store POS and McDonald’s and Nordstrom are also upgrading. Most reports assume this is to add the NFC/token support, but couldn’t it just as easily be for an iBeacon supported system?
      • Other companies, Square, Google Wallet, etc. have has small success doing this already.
    • Do they need support from the payment processors and credit card companies if it’s tied to your iTunes account?
      • I would have thought not, but we have already heard rumors that Apple has deals in place with Visa, MasterCard, and AMEX
      • Might be more about getting a better rate on their payment system transactions and could be based on the massive volume that they will likely generate
• Using iBeacon as a payment platform doesn’t have to happen at the exclusion of NFC
  • Just because Apple’s payment system may not be based on NFC doesn’t mean the iPhone 6 won’t have NFC
  • NFC could be used for other applications in the iPhone.
    • Tap to set up for iHome and iHealth supported devices
    • Leveraged by developer API for 3rd party applications for transit, security and loyalty systems

Closing

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