EBay Inc Chief Executive John Donahoe often quotes a merchant saying NFC stands for "Not For Commerce" - and dismisses the prospects of Near Field Communication technology used to turn cellphones into mobile wallets.
He got some support this week from Apple Inc, which did not embed NFC chips into the iPhone 5.
NFC proponents had hoped Apple would endorse the technology, which passes encrypted data between devices at close range without contact. So instead of swiping a credit card, shoppers can simply wave their phones at a checkout terminal to pay for their goods.
The technology is backed by the largest US carriers and credit card companies, but has failed to take off in America because merchants have been reluctant to spend money to upgrade their checkout terminals until NFC is more widely adopted.
"Anyone hoping NFC would be a reality soon is disappointed," said Sanjay Sakhrani, an analyst at Keefe, Bruyette & Woods. "Many in the industry were hoping inclusion in the iPhone would be a springboard for more adoption. This takes the impetus away."
NFC technology, which has uses beyond mobile payments, is backed by Isis, a mobile wallet joint venture between Verizon Wireless, AT&T Inc and T-Mobile USA. Isis' financial services partners include American Express, JPMorgan Chase and Capital One Financial.
Like many new technologies, NFC is hampered by a chicken-and-egg problem. Mobile phone makers like Apple are reluctant to take on the extra cost and engineering effort of embedding NFC chips because many merchants can't accept payments this way yet. Meanwhile, merchants won't install NFC until more consumers have the technology on their phones.
Isis said on Thursday that it was delaying the launch of its NFC mobile payments service for the second time this year.
"Isis has placed a massive bet on NFC," said David Evans, founder of Market Platform Dynamics and an adviser to companies in the payments business. Apple's decision "is another reason to believe that Isis doesn't have much promise of getting off the ground."
Apple did not include NFC because it is not clear the technology solves any current problem, marketing chief Phil Schiller told AllThingsD on Wednesday.
Apple: Well pass
Instead of embracing NFC, Apple is developing Passbook, a mobile app that pulls together loyalty cards, tickets and coupons on the new iPhone. Many analysts consider this an early version of a digital wallet, except Passbook does not let users link their credit and debit cards yet.
Other digital wallets have already been developed by companies including eBay's PayPal, Google Inc and Visa Inc. These wallets aim to bring together credit and debit cards, bank accounts, loyalty cards, rewards and coupons in one place, letting shoppers pay for purchases mostly online, but increasingly in physical stores too.
NFC's advocates argue it eliminates plastic and cash and can be more secure than magnetic strips. But that alone will not persuade consumers to stop using credit cards in stores because plastic is already so convenient, experts say.
"It is a new technology and one that is unfamiliar to users. So that opens up new possibilities for abuse and naivetÃ©," said Charlie Miller, principal research consultant with Accuvant. But he said NFC allows for interesting security options that traditional credit cards don't, such as account numbers that change dynamically.
PayPal is betting that other services that make digital wallets more useful will encourage consumers to switch - it is designing a digital wallet that helps consumers do as many things as possible from one place, including buying flight or movie tickets, sending money to other people and tapping coupons, rewards and loyalty cards.
"Technology is not what's going to win this digital wallet war. It's going to be about the consumer value proposition," said Carey Kolaja, senior director for PayPal's product team.
Others argue NFC still has potential, partly because merchant incentives from Visa and MasterCard are expected to spark a wave of payment terminal upgrades in coming years. These upgrades will include NFC capability.
"It is difficult to buy a new terminal that doesn't already have NFC technology, and soon it will be impossible," said Rick Oglesby of consulting firm Aite Group.
But the software and service providers behind the terminals will also have to be ready to accept and process payments that come with coupons, loyalty cards and rewards programs.
At the moment, most terminals can handle the amount of the transaction and the card number and not much else, Oglesby said.
Until this is all sorted out, Apple will likely wait to enter the payments business aggressively, Oglesby and others said. Apple took a similar approach to 4G LTE wireless technology, waiting until coverage was wide enough this year to unveil an iPhone that uses it, Oglesby noted.
"They won't do something until they know a lot of their customers will use the service," he said.
Aggressive iPhone launch plan boosts Apple outlook
Sales of the new iPhone 5 could be double those of the previous model in its first week on the market, thanks to Apple Inc's most aggressive smartphone launch plan yet, and up to 33 million iPhones may be sold this quarter, analysts said.
Many expressed surprise at how quickly Apple planned to roll out the new model around the world, saying this showed supply constraints that afflicted past releases would not be a problem this time for the bigger, faster and slimmer iPhone 5.
The new model ships on September 21 in the United States, Australia, Canada, France, Germany, Hong Kong, Japan, Singapore and Britain, and will hit 100 countries by the end of the year in the fastest international rollout for an iPhone so far.
While many Apple watchers said the new iPhone lacked a "wow" factor, Apple shares rose after the launch, in contrast to a fall after the launch of the previous model, the 4S, almost a year ago.
"We are positively surprised that this iPhone rollout is Apple's fastest yet," Barclays Capital said in a client note, adding that it had previously thought supply constraints for sensors in the new screens would hold back initial sales.
"Given this pace it would seem Apple is very well positioned for upside in the December quarter."
Analysts raised forecasts for Apple's share price by as much as $200 to between $750 and $1,000.
Apple shares were up 1.1 per cent at $676.91, in heavy trading on the Nasdaq.
The iPhone 5 sports a 4-inch "retina" screen that displays a sharper image. It can run on high-speed 4G LTE wireless networks and is 20 per cent lighter than the previous iPhone 4S.
"While it lacked the mind-blowing innovation we have come to expect of Apple, (it) is differentiated enough to maintain a sizable product advantage over its competitors," said FBR Capital markets, the brokerage that is forecasting Apple's shares to hit $1,000 within the next year.
The previous iPhone 4S initially got a muted response from investors on its launch in October 2011, but customers loved it and booming sales have pushed Apple stock up 80 per cent since.
Nokia, Blackberry blues
Apple will continue to win sales with older models, brokerage William Blair & Co added, putting more pressure on Research in Motion Ltd's BlackBerry, other offerings from Nokia Oyj and less-sophisticated smartphones that use Google Inc's Android software.
"The iPhone 4 will be sold for free after subsidies, replacing the 3GS and providing a strong product to compete in the high-growth, low-end smartphone market," William Blair said.
The brokerage raised its sales forecast for all iPhone models by 29 per cent to 33 million for the July-September quarter, at the top of forecasts seen by Reuters.
Brokerages raised their sales estimates for the September quarter from anywhere between 3 per cent to 36 per cent, with most expecting between 20 million and 30 million iPhones to be sold.
Janney Capital Markets said it expected the iPhone 5 to sell 7 million to 10 million units by the end of the month, while RBC Capital Markets expects 8 million to 10 million to be shipped during the same period.
RBC Capital said sales of iPhone 5 this month could result in additional Apple sales of $4 billion to $5 billion for the fourth quarter ending September 30. The brokerage increased its price target for the stock by $50 to $750.
More to come
Barclays, which raised its price target for Apple stock to $810 from $750, said Apple would have a "unique holiday season" as it would also benefit from a launch of a smaller iPad and new Mac computers.
Credit Suisse forecast 20 per cent growth in high-end smartphone sales next year, with Apple seen grabbing a 47 per cent share, topping archrival Samsung Electronics Co Ltd with 40 per cent.
It picked the two companies to capture just over half of the overall smartphone market, including less-sophisticated models, putting "tremendous pressure" on RIM, HTC Corp, Nokia and the rest of the Android market.
Glu Mobile bets on iPhone 5 gamers to score big
Smartphone games maker Glu Mobile expects a big boost to its sales from the success of Apple Inc's iPhone 5, which analysts predict will sell 33 million units this quarter.
The maker of mobile games such as "Big Time Gangsta" expects about two-thirds of its revenue this year from Apple's iOS mobile platform, said Chief Executive Niccolo de Masi.
Glu, which competes with social games company Zynga Inc, forecast revenue of between $94.4 million and $96.4 million for 2012 last month.
The popularity of the company's games on the Apple platform fuelled rapid growth for Glu last year, bringing in nearly a third of its total revenue of $66.2 million.
"In the fourth quarter of 2011, we came in 10 to 15 per cent ahead of guidance because of the iPhone 4S release," said Masi, who took the top job in Glu in 2010 and steered its focus from feature phones to smartphones that use Apple and Google Inc's platforms.
He expects the iPhone 5 to be have at least the same impact in the fourth quarter of this year and the first quarter of the next.
The new iPhone, launched on Wednesday, has a bigger screen and supports 4G wireless technology.
San Francisco-based Glu, whose games can also be played on tablets, plans to add 8 to 10 games in the rest of 2012 to the 12 it launched in the first half of the year. All of those are optimized for iPhone 5, Masi said.
"The main advantage Apple has right now is that they are doing great business in China," the CEO said.
China will overtake the United States as the world's biggest smartphone market this year, according to research firm IDC.
The company follows a "freemium" business model - luring in customers with some free products and services and then trying to get them to pay and upgrade to premium versions.
The game maker's stock has risen 50 per cent in the past 12 months. It closed at $4.79 on Nasdaq on Thursday.
In contrast, shares of rival Zynga, which is largely dependent on social networking giant Facebook Inc for revenue, have lost about 70 per cent of their market value since it went public in December at $10 a share.
"We're a mobile-only company. We don't make games for Facebook. We only cater to Apple, Google, Amazon and Microsoft platforms, and sell through their stores," Masi said.
Glu expects revenue from Google's Android platform to match those from iOS as more handsets start operating on Android, Masi said.
The company, which also licenses games from video game publishers such as Activision Blizzard Inc, got about 11 per cent of its 2011 revenue from Android users.