Apple’s NFC Move Ushers in New Era of POS Competition

Apple’s move to open up near-field communications (NFC) technology — specifically so that third-party developers can integrate NFC transactions — may turbocharge digital wallets’ momentum.

As PYMNTS reported this week, beginning with its newest iteration of the company’s operating system — iOS 18.1 — developers can embed the NFC contactless functionality within their own apps on the iPhone.

The open access, if we’ll call it that, means that the payments will be untethered from Apple Pay an Apple Wallet. The in-app contactless features thus will be conceivably deployed across a variety of use cases, from transit to merchant loyalty and rewards programs. By extension, the platforms and the ecosystems that have taken shape over digital-only channels now have a bridge to the physical realm, leveraging Apple’s hardware.

We noted last month that in terms of the technology, Apple will enable access to NFC in Host Card Emulation mode (‘HCE’), which allows the secure storage and use of payment credentials using NFC, without relying on an in-device secure element.

For Apple, the ecosystem’s gotten a bit less closed.

For companies such as PayPal, which already offers a tap-to-pay feature on iPhones for its merchant clients, the potential is there to boost its presence in brick-and-mortar merchant settings.

As PayPal CEO Alex Chriss said in the most recent earnings call, “consumers who love PayPal for online purchases are also telling merchants they want to use PayPal for their off-line purchases. We continue to drive the adoption of our card products, and we’re making it easier to add PayPal- and Venmo-branded cards to Apple and Google wallets on mobile devices. We are also looking forward to launching even more ways for consumers to use PayPal anytime, anyplace with NFC technology, starting in Europe.”

For the companies developing or already scaling their digital wallet offerings, the expanded access will prove a boon.

As reported here last month, digital wallets are poised to overtake debit cards in transaction value at the point of sale (POS) in North America by 2027. According to a recent Worldpay report, use will more than double from 15% to 31% of POS transaction value between 2023 and 2027. At the same time, debit card use will decline from 28% to 23% during the same period.

This trend is not limited to North America. Digital wallets are expected to account for nearly half of global POS transaction value by 2027. This share was 30% in 2023.

Moving ahead, there’s the need to ink pacts with Apple to gain the access, and to pay at least some money to Apple too. In the meantime, for the digital wallets, there’s some tailwind to be seen for transactions as users, encountering the NFC options, embrace third-party apps as their default apps on their Apple devices.

Default Settings Build Repeated Use

A developer/support web page on Apple’s site noted that “the default contactless app automatically launches when a user presents their iPhone to a compatible NFC terminal and after user authentication (if their iPhone is locked).”

In other words, the app of choice pops up, the user transacts, the habit of using PayPal or other wallets is deepened now that the payments are not confined to Apple software.

The same developer page states that, in reference to in-store payments, “if you are a financial institution (or you’ve partnered with a financial institution) and have a license to offer payment services or have a valid and binding agreement with a payment service provider (PSP) that’s licensed or authorized to offer payment services in the eligible territories, you can request access to iOS APIs to develop, test, or distribute an NFC & SE Platform-based Payment Application,” which opens the doors to more providers and more use cases.