Why Apple's iBeacon Is Better Than NFC

There is no NFC capability in the new iPhones, but that's okay—Cupertino has bigger (and less expensive) plans for low-power radio wave-based mobile payment technology.

There have been on-again, off-again rumors about NFC capabilities in Apple's iPhone for years. Recently the dial swung to "on" when a patent surfaced that combined a novel fingerprint sensing tech with an NFC sensor—with some added spin considering Apple seems to be using this system to read your fingertips. But, sadly for some, there is no NFC in the new iPhone 5S. That's because Apple has iBeacon.

iBeacon was a tiny throwaway detail on a slide Apple showed about iOS 7 during its WWDC presentations earlier this year. But as GigaOm points out, more details about the service have emerged thanks to Estimote—a company that plans to integrate with the iBeacon system.

The key phrase to bear in mind about iBeacon is probably new for you: micro-location. We're all aware that location-based services (LBS) are a very rapidly emerging trend, be it "check-in" type services like Foursquare, or Apple's "apps popular near me" feature in the brand new iOS 7 App Store refresh. The principle behind these services is simple: If your device can tell where you are with reliable accuracy—say within a hundred yards at least—it can use this information in some way to either deliver you relevant information about your locale, or it can tag some piece of information you're sharing online with the location so it can be used by other users or services. But using a-GPS and Wi-Fi technology (such as navigation systems use to get you from A to B and which some department stores use to track the whereabouts of their patrons) means this sort of LBS isn't a wonderfully accurate system. And since there's not necessarily much security built in to these systems, there's a problem with positive authentication of a user's identity.

That's one of the issues NFC payment technology can tackle. It's effectively an incredibly precise "micro-location" system that positively identifies a user from data in their phone or, more simply, their NFC-enabled credit card. It works wirelessly and over what are typically very short ranges—such as the air gap between your NFC phone and a payment pad at a cash register in a store. During NFC payment transactions a simple process takes place: The register handshakes with the phone or credit card's circuitry over radio. The phone or credit card detects the signals, and responds with a coded answer that contains the user's payment data, and acts as a de facto authentication device. The NFC system is saying, effectively, the user identified with this payment data is the real owner.

But this is a very simple interaction between cash register and payment device. It's a modern analog of the chip-and-PIN system popular in Europe, where the card reader interrogated an encrypted chip embedded in the card, and it works in a similar way—just offering the bonus of a slightly speedier interaction because you don't have to plug your card into a slot. NFC isn't capable of very much more than this.

And this is where iBeacon comes in. It's based on Bluetooth Low Energy technology, which is a new variant on Bluetooth that works over shorter ranges than the typical 20-plus yards "normal" Bluetooth is capable of. This allows it to be run with a much lower energy burden on devices, which can run for significant periods off the equivalent power of a small wristwatch cell. Bluetooth is, of course, a wireless data channel that can handle much more bandwidth than a typical NFC interaction—it is powerful enough to carry live stereo audio signals, for example.

When BLE is applied to a payment system there's a lot of potential for more sophisticated interactions between the payee and the merchant's computer systems. For example, if you enter a store that's equipped with a BLE-powered iBeacon device, you would be carrying your smartphone into a sea full of radio waves. iBeacon would immediately know that your phone is within a very short range of the beacon itself.

At this point a number of things could happen: Your phone could get an alert telling you of the special offers of the day, or share a special dedicated coupon that's tailored to your needs, based on your previous shopping data. The iBeacon system could also direct you to the right part of a store to find a particular product—acting as "indoor GPS" if you like.

It's also easy to imagine that wireless or "touchless" payment systems would work very swiftly over iBeacon, because the beacons authenticate a particular user by their phone's unique codes and confirm that they're in a particular store—perhaps even standing at a particular cash register. There would be no need to swipe a card or even bump your phone against a sensor to share your payment data because that could all happen over a secure Bluetooth interaction without you even having to get your phone out of your pocket.

If you think that's fanciful, then remember Apple's EasyPay service which has evolved to the point that for some Apple stores, iPhone users don't even have to speak to an employee or visit a cash register to make a purchase: They use the App Store app on their phone, scan the code of the item they want to buy, authorize a payment over their iTunes account, and leave the store.

And there's one last trick that the new iPhone 5S has in favor of a mobile payment system using wireless services like iBeacon: positive user identification. This could come courtesy of the phone's built-in fingerprint sensor, which means the iBeacon system has the following set of authentication data: The user's phone is physically present in a retail location; the phone is properly ID'd, and shares coded payment data in the right way; and that the user of the phone, and thus the owner of the payment card, is positively identified as being with their device. Added together that equates to a level of security that makes credit card signatures on a slip of paper look positively medieval in comparison. Even an NFC payment interaction looks unimpressive compared to this.

There's just one problem, although it may be more of a perceived threat than a real one. The iBeacon service relies on an iPhone user (or, presumably an Android user with a BLE-capable phone that's running the right app) sharing their data over the radio. Without the ability to handshake automatically with a store's beacons, the service won't offer any value to the user...but the user may be concerned their data could be stolen, or "officially" snooped on, or remotely hacked and exploited for criminal purposes. With the right kind of encryption, however, the hacking and theft issues go away. And if users are concerned about data surveillance, then they're better off not even using credit cards.

If Apple plays its iBeacon cards right, it could even turn out to be the best kept secret superpower of iOS 7 and the iPhone 5S. All sorts of payment systems and LBS facilities could be created—the most interesting of which we probably can't imagine right now. And where Apple beats a path to the future, other firms will likely follow.

And yes. That is a very big "if."

[Image via Flickr user: Sigfrid Lundberg]

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  • Michael Bender

    Touching on the Bluetooth point - aw a lot of us that have had iPhones and used iOS over several generations probably know, Apple likes to "improve" things like implementing the latest BT protocol stack and then not providing a way for customers to revert back to the previous version of the stack. This "improvement" caused a lot of headaches for people with car audio systems that used to work just fine with their iOS devices using the older BT stack but stopped working when iOS came out with the new stack. Sure, it's great to be able to use the most current protocols, but Apple put the onus on the consumer to "fix" their BT devices, which, in the case of car audio systems, may not have been "fixable" since the manufacturer didn't have a firmware update for the audio system, or since the audio system couldn't have it's BT support updated at all. This is one of the prime examples of Apple's myopia and arrogance. I am an Apple user (Macs and iOS devices) since way before the first iPhone, and in the case of the BT fiasco, I happened to be installing a new car audio system so I had to choose one that would work with the updated BT stack in iOS, but I felt really sorry for all the people that couldn't upgrade their systems. Now think about what would happen if Apple did this in the retail POS marketplace - all of a sudden iOS devices stop working with all the large installed base of POS gear, how long do you think the POS vendors and merchants and consumers are going to put up with that nonsense before they stop using iBeacon?

  • Al

    "There would be no need to swipe a card or even bump your phone against a sensor to share your payment data because that could all happen over a secure Bluetooth interaction without you even having to get your phone out of your pocket."

    Sure, that's what I want do. Walk around with my phone in my pocket and have it automatically interact with my phone!
    Don't forget the payment flow in the background when all this happens. 
    It all boils down to 2 items. And it's always been these 2 items. It's distribution points and owning the customer.
    This is why Starbucks was somewhat successful and frankly you couldn't screw this up if they tried.
    So unless Apple stores want to start selling lawnmowers then they better hope for adoption because it's going to be costly outfitting a lot of merchants stores.

  • Hendrik

    Nowhere in this article you describe how transactions are done using an iBeacon. So you have this magic iBeacon register with ten people with iBeacon enabled phones with a basket full of shopping. And then what? The register knows what belongs to whom, what is in the basket? It is is not a replacement for a quick checkout using NFC. You think a cashier will check if your face matches that of you iBeacon (Facebook) photo?

    It is a tool for shops to promote stuff, follow you and probably automatically add you to some mailing list.

    And iBeacon won't work because of the "i". Apple only might sound like a wet dream to some, or maybe in the creative hub of silicon valley where everyone has an iPhone, but good luck with the locked down "standards" Apple tries to promote.

  • Vijay Aswani

    Lol, what this world needs are innovators. If you can't think of possibilities then you might as well go back to ur un-interesting world of thought. 

    If the register can talk to ur phone... so can ur phone talk to the register... just walk in to any store... scan all the stuff u need and click pay on ur phone... no register, no lines, nothing... the phone will make the transactions and pay to the vendor/store on its own via the beacon... and the store beacon will reply a success or failed transaction... voila... u then get to walk out the store with ur purchased items. Unless of course u have an Android and have to stand in line :-)

  • Dmitri Smirnov

    So that will need mobile internet on the phone, whereas NFC payments don't require that.
    Also, iBeacons only provide the ID of the room. And scanning goods with your phone as well as paying for them online... Heck, QR codes will do just that, as most important thing here is software and this will cover even more buyers.
    But, as most shops have anti-theft devices that have to be removed by employer.
    I am not even talking about buying train tickets or a pack of smokes at a stand.

  • Hendrik

    Hey Vijay, How about you don't scan a thing just put a bunch of items in a bag and walk past (or hold your bag against) a NFC scanner? Sounds crazy right? Well, this is how my library works already.  

    But, I can't thank Apple enough for the iPad, iPod and iPhone. Without these innovations we probably wouldn't be having these great choices in phones and technology.

  • Thijs van Ulden

    You can't compare NFC to Bluetooth. How do you imagine Bluetooth stickers will work?! Everything else you describe is already possible with WiFi or normal Bluetooth. Using a phone to scan and pay, really?! that's tech from the 90's. "With the right kind of encryption, however, the hacking and theft issues go away. " yes, but only with the magic kind, made by the Klingons. 

  • FearsForHisLife

    Classic Apple evangelism at work :) If Apple don't do it, then it's the entrepreneurs' fault for not innovating enough. If they do, then it's the best thing ever, even when it's not (iMessage, iOS 7 flat design, etc etc).

  • Renato Murakami

    I can kinda see how this is interesting, but "best" depends on what someone expects from the functionality.

    At least to me, it adds nothing. All that I really want is a "pass to pay" kind of system that works for some venues... like supermarkets and public transportation for instance.
    NFC already does that, but it lacks adoption.
    I don't want ads, promo codes, additional info on products, don't want to provide my micro-location to store owners, and stuff like that. Not even with the proper encryption.Credit cards might give some concern about data surveillance, but it's a pretty much estabilished thing now, and less failble or vulnerable (or perhaps just not as untrustworthy) than something provided by a third party - specially third parties who are known to willfully share data and insert exploits into their own products for "official data snooping".Not saying it's not interesting though. It'd an interesting thing for museums and art galleries for instance.