Apple Embeds NFC in Its New iPad Air 2, Stirring Speculation About Its Mobile POS Plans

When Apple Inc. officially launched its Apple Pay mobile-payments service on Monday, all eyes were on the new iPhone 6 and 6 Plus, the smart phones that carry the near-field communication (NFC) technology that makes Apple Pay work in stores. But now it turns out Apple has also embedded an NFC chip in its new iPad Air 2, the updated tablet it introduced earlier this week.

News of the chip, reported Thursday by high-tech repair Web site iFixIt after it conducted a teardown of the new iPad, has a number of payments experts speculating about Apple’s intentions with the device. Uses could range from peer-to-peer transfers to merchant point-of-sale acceptance of contactless cards and mobile wallets, they say.

The chip, an NXP 65V10 NFC Module, is the same unit found in the new iPhones, though in the iPad Air 2 it apparently functions as both an NFC controller and secure element. The technology is inactive for now but could be enabled by a later update of iOS, Apple’s mobile operating system.

The inclusion of NFC in the new tablet has some observers wondering whether Apple’s plan is to make the device just as dominant as an acceptance terminal in the mobile age as older iPads are for mag-stripe transactions. A slew of startup tech companies like Square Inc. and ShopKeep POS have adapted the iPad as a mobile point-of-sale device for merchants since Apple introduced the device in 2010.

Now, with chip cards based on the Europay-MasterCard-Visa (EMV) standard expected to hit the mass market within a year, these merchants will be looking for ways to accept EMV cards on their tablets. Many—perhaps most—of the cards are likely be dual-interface, or cards that can either be inserted in a reader or waved for contactless transactions. That contactless capability will be enabled by NFC, and it now appears Apple will be ready for it, some observers say.

“As tablets go out with NFC chips, you’re putting out an acceptance device. There’s nothing that has to happen but a software update,” says Todd Ablowitz, president of Double Diamond Payments Research, Centennial, Colo.

To the extent the new tablets are ready for contactless EMV cards, they will also be enabled to accept NFC-based mobile wallets ranging from Apple Pay to Google Wallet to Softcard. But many experts expect Apple Pay to be the dominant wallet. Even before its launch, it had already enlisted enough cards to account for more than 80% of U.S. credit card dollar volume.

Rick Oglesby, a senior analyst at Double Diamond, figures Apple may have left the NFC capability inactive for now because of a plan it’s following that may be even broader than the EMV rollout. “Apple has its own internal agenda as to how NFC should develop,” he says. “They’re staging things, and have a reason for staging them in that way.”

Apple did not respond to inquiries from Digital Transactions News regarding the iPad Air 2’s NFC capabilities.

Nor do all experts see any sort of sweeping agenda behind Apple’s decision to include an NFC chip in its new tablet. Cherian Abraham, who follows mobile payments as global consulting practice analyst at Experian Decision Analytics, tells Digital Transactions News Apple likely wants to use NFC to enable in-app Apple Pay purchases on the iPad.

“You need an NFC controller and a secure element to come into play for in-app payments,” he says. In-app payments with Apple Pay can be done on Apple devices without NFC, such as the iPhone 5, but only using cards on file with iTunes.

Besides, Abraham argues, the iPad will remain the dominant tablet for point-of-sale use with or without NFC built in. “It makes sense for Apple to benefit from the mPOS market, but they don’t need to enable [NFC] payments to show the platform they have built is more than sufficient, mature enough to be a point-of-sale device.”