Apple Pay to Support Direct Payment of Goods via NFC Tags and Stickers

Apple recently revealed that it would be adding support for Near-Field Communications (NFC) tags and stickers that are capable of initiating Apple Pay payments. This can be achieved without the need to download a third-party app for payments, meaning that an end user can simply tap on an NFC tag-enabled product, rental item, parking meter, or other item with their iPhone, verify with Face ID, and complete the payment transaction. The news should provide a further incentive for product vendors and owners to incorporate NFC tags into their items, building on recent advancements in NFC tag production and the availability of very low-cost tags on the market.

Apple announced their first wave of supported vendors during the TRANSACT 2019 conference in Las Vegas. 

Clothing retailer Bonobos will be adding NFC tags to its clothing racks, allowing customers to order items to be shipped to their home right after trying them on in the store. As the company’s retail stores are utilized as showrooms, the NFC tag process can streamline the transition from trying on a garment to ordering and mailing it to the customers home. This could naturally lead to higher conversion rates than purchases that require installing a dedicated app.

PayByPhone is planning to deploy NFC tags to its parking meters in San Francisco, allowing for app-free payments. Another named pilot partner was Bird scooters, who allow for their equipment to be easily rented without the need for more complicated app sign-up.

Apple is also planning to enable speedier enrollment to loyalty cards via NFC tags. Companies such as Dairy Queen, Jimmy John’s, Dave & Busters, Caribou Coffee, Yogurtland, and Panera Bread are all planning to leverage the single-tap simplicity of NFC tags and Apple Wallet to replace form sign-ups and physical card requirements.

In the longer term, the implications of widespread deployment of NFC tags that support payments could be significant. Retailers could equip product shelves or items themselves with NFC tags and allow customers to pay directly without the need to visit a checkout register. Smaller vendors or pop-up shops could take payments for items without the need for more conventional Point-of-Sale (POS) equipment that supports Apple Pay. The ease and secure nature of NFC tags and its single-tap simplicity and convenience could vastly increase conversion rates in retail environments, increase the chance of loyalty sign-up, and allow retailers and customers to build closer relationships.

Beyond payments themselves, NFC tags can provide additional benefits that go beyond mere convenience. From a prepurchase perspective, NFC tags can also be leveraged within product or shelf labels, potentially providing valuable prepurchase information to a customer to draw attention and ease their decision in purchasing a product. For example, tapping an NFC shelf label could direct the customer to product reviews, to video content on product uses, and to recipe ideas; it can also provide a link to the store’s website or an app download for ordering the product online if it is out of stock or if an alternative color or size is preferred. Not only can this improve purchase conversion rates and help defend against competitors, but also it can help save in-store shelf space and associated inventory costs. Tapping a label could also provide immediate discount codes to be leveraged in store, or it can lead the consumer to other relevant items in exchange for mail sign-up, app download, or social media share, increasing the chance of a sale while gathering vital customer data and building a positive in-store experience to attract and encourage customers to return a store.

In addition, NFC tags can be utilized to greatly strengthen the relationship between brand and customer after the product has been purchased. Customers who tap their smartphone on their newly purchased product can be provided with value-added content, including:

• Entry into exclusive prizes, competitions, and rewards programs.
• Access to exclusive value-added audio and video content.
• Targeted discount codes.
• Guidance on how to get the most out of a purchase via access to product-specific content, which could include aftercare and maintenance instructions: for garments, a customer could bring up specific washing instructions and links to related products or to complementary accessories for purchase; for food and beverages, unique recipe ideas and instructional meal preparation videos can be provided.
• Personalized gift messages tailored to the end user.
• Educational videos and product manuals for more complex products that require more end-user investment: rather than browsing a company website with thousands of products and entering a serial number, an immediate tap on product can bring up a link to the correct manual or content for that device.
• Incentives and simplifications for product review and the feedback process.
• Simpler registration and warranty processes used to activate or upsell respective warranty services.
• Contact information for customer services for product concerns or for booking a service appointment if a product is faulty.
• Access to product catalogues or links to other relevant complementary products.
• Easy reordering of the same product.

Widespread NFC reader penetration alongside the emergence of feature-rich NFC tags and innovations in silicon tag production efficiency are combining together to enable widespread deployment of NFC tags for marketing, engagement, and brand protection purposes. NFC solution providers have made enormous strides over the last few years to reduce the overall cost of adopting this technology. According to the leading NFC tag vendor, NXP Semiconductors, the cost of silicon-based NFC tag solutions has fallen by 10 times in less than ten years. Solution providers can now offer fully certified and tested NFC tags in very high volumes for less than US$0.05 per unit, making it a viable technology for even the most cost-sensitive consumer goods items.

Though NFC tags are well established and already represent a sizable market, ABI Research believes that the next few years will see a significant expansion in NFC tag deployments and opportunities. While it is difficult to estimate how quickly the technology will expand, it is clear that many of the barriers to NFC adoption—including cost, scalability, integration challenges, mobile compatibility, and increased smartphone penetration—are being removed. New use cases such as tag payments from the companies such as Apple will provide additional incentives for vendors to adopt NFC tags in their products. By 2023, ABI Research expects cumulative shipments of NFC tags to break the 10-billion-unit barrier.