If you have a life, you probably haven't been following the great Apple iPhone 5/Near-Field Communications (NFC) debate. Good for you. But spare a minute to catch up, because it could -- admittedly a few years down the line -- affect the credit cards in your wallet in a big way.
What's the big deal with NFC?
All the big credit card payment networks ( American Express, Discover, MasterCard and Visa) have over the last year published plans for the introduction into the U.S. of "EMV" cards, the ones that have onboard microprocessor chips. These "roadmaps" have also included provision for NFC, the technology that allows you to wave or tap an enabled card or smart device near a point-of-sale payment terminal instead of going through the usual swiping process. Mastercard's PayPass and Visa's payWave already allow this in the relatively small number of merchant outlets that are currently equipped with NFC terminals.
However, in September, Apple released its iPhone 5. And, unlike some smartphones, it does not come with NFC capabilities. This means that the most anticipated new method of payment terminal checkout just got slighted by Apple. The question is why?
NFC transactions still incur swipe fees
Credit card networks charge merchants a swipe or interchange fee every time a card is swiped, waved or tapped by the customer. Credit card swipe fees are already under threat from legislators who'd like to cap them, just as they did on debit cards in 2011. And anyone who's now paying for what used to be a free checking account can guess what that could mean for their credit cards. Swipe fees are one of credit card companies' biggest revenue streams, and any significant reduction in their flow could see the widespread introduction of annual fees and a slashing of rewards programs.