Apple to follow Google with mobile payment technology in iPhone 5, iPad 2

It looks like 2011 will finally be the year in which near-field communication (NFC), a short-range communication technology used for mobile payments and information transfer, will finally make a splash.

Apple is apparently integrating the technology in the iPhone 5 and iPad 2, following Google’s release of the Nexus S with NFC built-in, Bloomberg reports.

The news, which has been rumored for months, comes from analyst Richard Doherty, director of consulting firm Envisioneering Group, who cited engineers working on the upcoming Apple devices. Apple is specifically interested in letting consumers use the iPhone 5 and iPad 2 to make purchases — for example, by paying for a restaurant bill with their phone — and will potentially revamp iTunes to take advantage of NFC. Apple is also testing a payment terminal for small businesses using NFC, Doherty said.

The technology could also be used to improve targeted advertising, according to Richard Crone, head of financial industry advising firm Crone Consulting. It would allow ads to know exactly where you are and potentially fetch higher rates in the process. Since NFC requires close contact to transfer information, it could be much more useful to targeted ads than GPS alone, which notoriously has trouble locating users in busy cities and indoors.

AT&T, Verizon and T-Mobile are collaborating on their own NFC-based mobile payment network dubbed Isis, and Google likely has something planned as well. I suspect we’ll see many NFC-enabled devices this year, but it will likely take mobile payment operators, as well as small businesses who would best take advantage of the technology, months to get a handle on it. By 2012, with NFC handsets common and more mature mobile payment networks available, I suspect the technology will explode in popularity.