Cloud vs. NFC: What the iPhone 5 Says About Where Digital Wallets Stand Today

Apple's decision to disregard an NFC component in the iPhone 5 illustrates just how far the technology is from adoption - and may present an opportunity for cloud-based digital wallets.

As Bank Systems & Technology reported last week, those proponents of NFC who were hoping Apple would bless the technology by including it in the iPhone 5 were sadly disappointed. Apple seems to believe that we are too far away from NFC adoption in the U.S. to bother including it in the latest version of the iPhone, even though some say that that inclusion would have given NFC the dramatic boost it needs for merchants to start accepting it. And the bad news kept rolling later in the week for NFC when Isis announced a further delay in the release of its digital wallet.

"It's going to take time for NFC; a lot of time," says Teresa Epperson, Managing Director at AlixPartners, a consulting organization. "Consumers won't wait for it."

Epperson regularly surveys consumers to gauge their interest in mobile payments and digital wallets. Consumer interest in digital wallets that allow them to consolidate coupons and loyalty points in one place is already very high, she relates. More than half of consumers (55 percent) are interested in idea, her research shows. The gap between the consumer demand that exists today and the time it will take for NFC adoption will give an opportunity to alternative digital wallets solutions that leverage cloud step in and snatch up a chunk of the market. These solutions, she notes, would make compliance much easier for merchants as compared to NFC. "A land grab will go on over who will get to market first," Epperson predicts.

Although cloud-based wallets may have a leg up if NFC is still a long way off from adoption, Epperson says that NFC will eventually reach adoption because it has strong support from players in the payments industry. Some kind of catalyst will be needed to get adoption rolling at some point though. If Apple could have provided that catalyst if it had put its considerable stacks of chips on the table to bet on NFC, and until some impetus occurs cloud-based wallets will have plenty of time to gain a foothold with consumers interested in digital wallets.

Jonathan Camhi has been an associate editor with Bank Systems & Technology since 2012. He previously worked as a freelance journalist in New York City covering politics, health and immigration, and has a master's degree from the City University of New York's Graduate School ... View Full Bio