iPhone 5 and iPad 2 may have NFC payment tech to compete with Android

The big feature of this year's iPhone and iPad updates may be Near Field Communication payments, according to the Envisioneering Group, a US consultancy. Its director, Richard Doherty, assured Bloomberg he'd been chatting to engineers who are working on the project.

One of the key uses for NFC is to pay for real-world goods and services by touching a device to a reader -- an example is the Oyster card system used on the London Underground network. The potential for Apple to make even more money by introducing NFC to its iOS devices is huge -- not least because every one of them is already linked to an iTunes account, and thus a credit-card or bank account.

Having NFC tech in the iPhone 5 and iPad 2 would only be part of the story. Doherty claimed that Apple has created a prototype payment terminal for use in shops and businesses, which it may even give away to ensure take-up. You'd expect such a system to be in use in Apple Stores first, as a showcase.

Bloomberg's report cites Apple's hiring last year of mobile-payments executive Benjamin Vigier as a key indication of its NFC plans, as well as a related patent request filed by the company.

Another reason why Apple might get into NFC sooner rather than later is competition from Google. NFC is part of the Android 2.3 Gingerbread software, with the Google Nexus S the first Android smart phone to include the necessary NFC hardware.

We're also intrigued by what else might be done with NFC, which, as TechCrunch points out, is good for more than just touch-based payments. It can also be used to transmit information to other devices over short distances, which raises interesting possibilities for everything from gaming to social location services.