Apple Pay's next move could be phone-to-phone payments

The NFC standard supports it, but payment software hasn't enabled it yet

A payment terminal with an NFC payment logo compatible with Apple Pay and Google Wallet

A payment terminal with an NFC payment logo compatible with Apple Pay and Google Wallet

The launch this week of Apple Pay is giving many people their first taste of NFC payment technology, which allows them to buy things in a store by bringing an iPhone 6 close to a compatible terminal.

But the NFC standard also allows payments to be made directly between smartphones. Apple and its competitors, such as Google Wallet, don't offer support for that part of the standard, but the technology already exists inside many of today's NFC-equipped phones and could one day allow retailers to accept NFC payment using smartphones. It would also be technically possible for individuals to exchange money with their friends through the same system.

The NFC standard defines three modes for the technology.

The first, and most simple, is for reading small snippets of information such as phone numbers or Web addresses from wireless tags. The second, used by Apple Pay and Google Wallet, involves the phone emulating an NFC payment card. The third allows the NFC chip to function as a card reader.

It's this third mode, if enabled by Apple or Google, that would allow a smartphone to accept payments.

Smartphone payment systems are already common in some countries. Perhaps the most famous and recognizable is the Square system, which uses a small magnetic stripe reader that plugs into a phone's headphone jack. In Europe, some companies offer card readers for more secure chip-based payment cards, but nothing exists yet for NFC.

"We've been working on it at Mastercard for a little while," said James Anderson, the company's senior vice president of emerging payments. "We're interested in turning every phone into a payment acceptance device."

But while many of the NFC chips used in smartphones support it, not every phone could necessarily be used to accept payments.

There are a number of requirements for NFC payments, such as the minimum and maximum distance over which the NFC transaction can take place and the speed with which it happens. Terminal manufacturers design for these requirements, but not all smartphones have necessarily been built with these in mind.

"There may be situations in which the two devices may technically be capable of exchanging data for payment, but may not be able to achieve the read ranges and/or response times required for them to be certified as contactless payment capable," said Sam Shrauger, senior vice president of digital solutions at Visa.

For now, the industry is watching closely to see consumer reaction to Apple Pay. If it takes off, competitors such as Google would probably step up their offerings and the NFC payments field would become a lot more competitive. That might bring new features such as phone-to-phone payments into play.

Martyn Williams covers mobile telecoms, Silicon Valley and general technology breaking news for The IDG News Service. Follow Martyn on Twitter at @martyn_williams. Martyn's e-mail address is

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