Ask any iPhone user what the next iPhone really needs and chances are you’ll hear “NFC so I can make payments with my phone.” Given how much our smartphones have become essential to much of what we do in our daily lives–from checking email, to navigating a city, and even turning our lights on and off–the ability of a built-in mobile payments function that doesn’t require any extra hardware on the user’s part does seem like a huge oversight on Cupertino’s part.

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Bridge devices like Coin and services like Square have many of us imagining an increasingly wallet-less life. But two developers from Sydney think they can leapfrog Coin and other stopgap solutions with something called Proxima Wallet, the iPhone’s first truly contactless, proximity-based mobile payments solution. The value proposition: no physical credit cards, no card readers to plug in. Makes it sound a lot like NFC, doesn’t it? But given that iPhones don’t have NFC capabilities, how does Proxima Wallet work? Via a technology that was not possible before iOS 7: iBeacon. A Payment System Born From Closed Doors “In Australia the financial services industry is very heavily regulated, so the rate of change we have in the country is quite slow,” Dan Nolan, cofounder and engineering lead of Sydney startup Proxima tells me when I ask him how the idea for his contactless payment solution came about. “The certification process for card readers is incredibly cost prohibitive, to the point that it feels almost deliberately designed to benefit those who already have a foot in the door.” So Nolan, who has been developing for iOS since its inception, and his business partner, Sebastian Pedavoli, decided to take their business and coding interests–mobile payments and proximity awareness–and combine them into one solution, bypassing the hardware smartphone card reader market altogether. The result is the entirely software-based Proxima Wallet, which is currently in private beta and is set to launch early next year. “We think it is better than a card reader because there’s no swiping required,” Nolan says. “Pull out your phone and tap the card on your screen that you want to use when approving the payment, the payment backend negotiation process takes a few hundred milliseconds and you’re done. You’ve got your round of drinks or your donuts or even your clothes in a fraction of the time that it would take for a swiped card payment or even cash.” When you see it in use, the advantages of Proxima Wallet are stark compared to other currently available mobile payment solutions for iOS. On the user’s side, there is no physical credit card to take from your wallet; you do everything in the app. On the vendor’s side, there is no card reader that needs to be plugged into your phone; the iPhone itself, as you bought it, is the cash register. No swiping required.

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NFC versus iBeacons Though the general consensus is that NFC is the most advanced way to process contactless payments, which is why many Android phones have the technology built in, the technology is actually pretty inefficient. For starters, NFC chips are power-hungry beasts, and when your phone is your wallet, you don’t want it running out of juice. This is probably the primary reason Apple has never put an NFC chip in an iPhone. As Nolan points out, “Remember, this is the company that didn’t put 3G chipsets in their first iPhone because they were concerned about battery life.” Another problem with NFC is that it is relatively costly to install the infrastructure to accept NFC payments. NFC-equipped phones must be tapped to an NFC terminal reader to work. To add NFC terminals in every mom and pop store across America would be a huge financial undertaking, which leads to a vendor adoption barrier. For the user, that severely limits the benefit of NFC. After all, what good is NFC in a phone if there are few cash registers to use it with? iBeacons, on the other hand, are both low power and very, very cheap (less than $30 a beacon–and dropping). iBeacons were first introduced at WWDC this year. An iBeacon can be any device with a Bluetooth 4.0 (also know as Bluetooth Low Energy) chip inside that constantly broadcasts an identifier telling other devices its there. Using the iBeacon API, iPhones can talk to other iPhones or other hardware beacons–which are just small BLE devices the size of a quarter (and shrinking) that can be placed around a store, or even an entire city. These beacons constantly broadcast their existence and micro location to apps capable of picking up their presence. When iBeacons were introduced, the advantage of their use for micro location proximity detection was obvious: A retailer, for example, could buy a piece of iBeacon hardware to stick above its door. When a customer walked in, if they had the retailer’s app, their phone could alert them to the latest sales since it would know that phone’s owner had just walked through the door. This proximity accuracy is something not possible with macro-location technologies like Wi-Fi, 3G, or even GPS. “A macro location will give you a latitude and longitude of where you are in the world––with varying degrees of accuracy,” Nolan says. “Micro locations are more about proximity and the location of something in context of something else: be it an asset–a beacon–or something in that vein. Think of it like walking down an aisle in a retail store, each individual piece of clothing could have their own micro location whilst being inside the macro location of the retail store. The two can work quite effectively together, kind of like different stages within a giant music festival.” And while many saw the advantage of hyper-focused location accuracy in iBeacons (including Nolan, who is working on a separate technology called Proxima Experience to create “location experiences” for festivals, museums, and even the City of Sydney) Nolan and his partner also saw iBeacons as the way to solve the fragmented mobile payment ecosystems on iOS––and give users NFC mobile payment abilities without actually using NFC.

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“The cool thing with beacons is that you’re able to get an approximate range in terms of distance to the beacon,” Nolan says. “So you join the queue to buy something from the vendor and when you get to the top of the queue the vendor can take your order, which is all seamlessly handled by the software the vendor uses. You approve the purchase and the entire communication is handled securely over the multipeer APIs Apple shipped in iOS 7, and proxied through the vendor’s device if your device does not have a currently responsive Internet connection.” The future of iBeacons “We’ve only just scratched the surface really,” Nolan tells me when I mention how powerful and versatile iBeacons seems: mobile payments, micro locations, iPhone-as-beacon. Their true use seems to be only limited by a developer’s imagination. “One of our favorite working concepts is a multi-lingual museum or gallery experience, so that tourists from all over the world can visit an art gallery, be handed a device, and get a personalized tour with extended information on all of the exhibits in their own languages. I’ve always been fascinated by technology and tools that help break down language barriers. I know that Proxima could do an incredible job changing how tourists experience travel. The exciting part about the work we’re doing is the experience changes for each partner we work with.” But if iBeacons offers so much promise–as indeed Nolan’s Proxima Wallet has proved by giving iPhone users all the benefits of NFC payments without any of the drawbacks–why did Apple give the technology no more than a brief mention at WWDC? iBeacons only made an appearance on a single slide during the keynote. “Apple’s very good at doing a soft launch of a tech before ramping it up and pushing it heavily. They never do anything without a great deal of thought and insight,” Nolan says. “I think in true Apple style they’re holding back on what they want to do with iBeacons until they get the experience working 100% in a way that they’ll be comfortable with and proud to deploy.” Until then, it’s up to the indie developers to really make use of the tech, which, again, I’m surprised more aren’t doing. Nolan thinks the lack of interest from developers is due not to the fact that they don’t recognize the power of iBeacons, but due to the fact that those that are looking at the iBeacons space are coming at it from the wrong angle. “We’ve met a few people tinkering around with beacons but it seems that most people working in the beacons space are working on building the hardware,” he says, meaning the cheap quarter-sized Bluetooth beacon transmitters. “We’re convinced the hardware is going to become commoditized within the next few months, so we want to build the software and systems that help people build cool experiences with the beacons of their choice. I expect we will see more people moving in the beacon space once we have a few examples of how they can be used in the real world. We’re working very hard to make sure those real-world experiences get into the hands of people as soon as possible.”