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Apple, NFC, EMV and the mPOS revolution

Forget about screen size, or sapphire metal, the iPhone launch next week is all about mobile payments – everything else, for us here at Aviso anyway, is window-dressing.

Apple needs a game-changer and their entry into the mobile payments market – which now seems imminent – could well be it. Crucially, when Apple leads the industry usually follows.

Apple NFC


Forums and tech sites are overflowing with talk and speculation about Apple’s September 9 launch in Cupertino (new campus plan pictured above). It has been widely reported that Visa, MasterCard and American Express have all inked agreements with Apple for a new iPhone mobile payments system. The new iPhone is also set to feature a Near Field Communication (NFC) chip for the first time. This NFC chip is the key to opening up the mobile payments market for Apple.

So, what is NFC?

NFC enables an iPhone, or another smartphone, to communicate wirelessly with other similarly-enabled devices by just tapping them together. That’s the key, both the smartphone and the POS/mPOS device must be NFC-enabled.

To be successful mPOS needs user adoption and retailer adoption. So far many retailers have not been convinced by the benefit of upgrading their POS systems. Now, however, the request from EMVCo to upgrade by October 2015 has been taken seriously and with that comes NFC-enabled terminals: all ready to take contactless payments. Apple may well be entering the market at the perfect time.

How does NFC work? Simple really. At the cash register the customer will just have to wave their new iPhone at an NFC-enabled device. The payment will then be processed. The back-end part of the transaction will not change. Transactions will be processed using the same methods that are used today. Reports indicate that the Dutch company NXP will provide the NFC chip for the new iPhone to perform mPOS transactions.

There are other uses for the NFC chips. They can, for example, also be used for peer-to-peer functionality such as pairing with headphones (remember Apple bought Beats in May for $3 billion) and printers.

Growth of contactless payments

Presently, in the Eurozone, UK, China and Australia NFC-enabled credit and debit cards can be used for payment. These contactless transactions are limited to smaller amounts ($100 in Australia, €15 in the EU, and £20 in the UK). The amounts are limited as research has shown that consumers tend to use their cards more frequently for smaller transaction amounts.

Contactless payments are covered by the same chip-and-pin fraud guarantees as for standard card transactions and after a pre-determined daily volume of transactions the customer will be required to enter their PIN.

Contactless payments are gaining momentum from their initial, mostly mass transport applications, to more widespread usage as card issuers and merchants make them available to customers.

McDonalds are already preparing for a new mPOS system. The fast food behemoths recently sent an internal memo to staff to ensure they were up to speed with this new system by September 15. It seems that the ‘new’ system will offer a cross-platform NFC option using standard VeriFone hardware that already exists in many McDonalds locations.

Then there’s the Chinese market – the key driver, many believe, for Apple’s potential entry into mobile payments. Chinese demand has led to a 27% rise in EMV and contactless card demand worldwide.

Apple’s potential mPOS plan

Apple will take cognisance of the fact that Google Wallet launched in 2011 but failed to take off.

Apple already has a headstart in the embryonic mPOS market. It currently holds the credit card details of 800 million customers thanks to iTunes and the App Store. This data is priceless. By having these details Apple doesn’t need to encourage people to sign up, one significant hurdle already cleared. User adoption is the most difficult first step for any new technology.

Then there’s Touch ID, the fingerprint scanner that Apple included in the iPhone 5S, currently used to purchase via Apple’s own ecosystem: iTunes, iBooks, and the App Store.

It’s introduction last year seemed to point in one direction: payments, secure payments. What is more secure than your own fingerprint?

Apple’s iBeacon product – a Bluetooth-based location sensor – is also aimed at the retail sector, allowing shoppers to get up-to-date deals while they peruse a store’s merchandise. The iBeacons locate iPhone users (applies to users with iOS 7 and older) and send messages about discounts and sales, all while the potential customer walks around a store.

Apple’s retail vision is one where consumers walk through stores, they get iPhone notifications of a ‘30% off’ sale two aisles down, and then they pay with a tap of their iPhone. Simple, just what consumers like.

How Aviso can help?

No matter how many new channels enter the payments ecosystem the processing of transactions still has to be safe, reliable and fast. Aviso’s Novate product is easily integrated into any payment processing system. It accepts and processes all message types, is extremely reliable, cost-effective, and fast: there is no ‘downtime’ with Novate.

While much of the focus in mPOS has been on the front-end of the service, Aviso provides a compelling, easy to implement, and rapid back-end solution for anyone seeking to start accepting mPOS payments in different markets worldwide.

Aviso’s EMV Wrapper product achieves EMV migration without wholesale change to a customer’s infrastructure. Crucially, it is cost-effective, quick and simple. Some merchants may even revert back to cash-only payments if they feel the migration costs are too high. This is where Aviso’s EMV Wrapper comes into its own.

Novate can enable mPOS providers to seamlessly integrate with either acquiring banks or card schemes in order to start accepting payments.

Novate provides a robust, secure platform on which the next generation of innovators in the payments space can build their businesses.

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For more information on our products and services contact us at info@aviso.io, or follow us on Twitter and LinkedIn.

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