One of the elements of the Justice Department’s lawsuit against Apple, filed a few days ago, concerns the NFC chip in the iPhone. This is the chip that powers Apple Pay, and the company won’t let outside companies use it, citing security and privacy concerns. It looks like that’s about to change, and Apple is secretly preparing for it now.
Apple Pay on iPhone.
According to Bloomberg’s Mark Gurman in his latest Power On Newsletterthe system, which has already changed in the EU, could soon change in the US as well.
The NFC chip is what makes Apple Pay so fast and easy to pay for things by tapping your phone on a card reader. But Apple has gone so far as to guard access to it. After all, if a bad actor could pull it off, there’s a serious risk they could take your money, too. Since day one, Apple Pay has been seen as a highly reliable and secure payment method.
It’s worth mentioning that by keeping the NFC chip locked, it also protects the royalties charged by Apple on each transaction. If a third-party finance company were allowed to use the NFC chip, it could charge its own royalties, leaving Apple out of the equation.
As Gourman reported almost two years ago, this is not a new issue: “Apple policy means that PayPal and Square—as well as financial institutions like Chase, Citi, and American Express—cannot launch iPhone apps with tap- to-pay with their own features and interface. It also means that if they want to access the iPhone user base, they will have to pay a fee of up to 0.15% on every Apple Pay credit card transaction.” He says he’s seen “estimates that Apple Pay brings in $1 billion a year in fees.”
For financial and security reasons, then, you can see why Apple doesn’t want to open the chip.
However, when the European Union introduced the Digital Markets Act in early March this year, one of the conditions was that Apple had to provide access to the NFC chip. Citing security concerns, Apple was wary of doing so, but reluctantly agreed.
Behind the scenes, perhaps because it fears it may be forced to introduce similar freedoms elsewhere, change is underway.
As Gurman says, “Apple has already opened up NFC access in Europe, and I’m told the engineering work to do so in the US is already underway.”
Which means Apple is preparing, even if it hopes the day it needs to implement it never comes. There’s no timescale here, but if things go smoothly in the EU and Apple works to make sure it happens, then this seismic shift could come to the US in the coming months or years.
