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The Biggest iPhone 5S Feature Nobody's Talking About


While everyone argues the merits of fingerprint sensors and gold trims, one overlooked feature could be the real game-changer for the iPhone.

Last week, Apple (NASDAQ:AAPL) unveiled the two latest models in its iPhone line, the iPhone 5S and 5C, to a series of yawns and eyerolls. It being an interim "S" year for the mobile device, many analysts were correct in assuming that the new features would be evolutionary, not revolutionary, and far from earth-shattering. However, at a time when Google (NASDAQ:GOOG) is stealing much of the thunder away from Apple with innovations like Google Glass and the hands-free contextual awareness of the Moto X device, many were looking toward Cupertino to deliver a feature that could completely upend the industry.

Well, it did. Apple just didn't say anything about it.

For years now, Google has been trying to get near field communication (NFC) off the ground by championing Google Wallet, a mobile payment system that uses a proximity sensor to activate a transaction. The problem is that, among the vast array of Android devices, only a handful of phones sport an NFC chip that can support Google Wallet. Worse yet, few retailers actually have kiosks at the register to accept payments from the app, and other NFC payment systems -- like ISIS from Verizon (NYSE:VZ), AT&T (NYSE:T), and T-Mobile (NYSE:TMUS) -- have been clamoring to become the de facto mobile payment system, producing a chaotic mess of proprietary technologies that are incompatible with one another.

And, most damning, Apple has time and again refused to install an NFC chip in its mobile devices, leaving those mobile payment systems without a major player that would buoy them into relevance.

While at the time it seemed that Apple was dragging its heels on innovating upon the most recent incarnations of the iPhone -- and given the increasingly lackluster debuts, that became a common assumption -- it now appears to all be in preparation for Apple's new system that could revolutionize not only mobile payments but also location awareness and commerce itself.

Touched upon at Apple's WWDC conference in June but wallowing in radio silence since, iBeacons is Apple's answer to NFC. Whereas NFC relies on inexpensive tags at very close proximity to trigger an action, iBeacons uses small wireless sensors equipped with Bluetooth low energy (BLE) that can detect an iPhone at a wide variety of ranges up to roughly 160 feet, allowing for different actions depending on the distance from each beacon. Sensing both region and range, it's kind of like an indoor GPS system but with greater precision.

To be sold to store owners and myriad potential users, and hovering at around $99 for a set of three, the beacons themselves are far more pricey than the NFC sticker tags, which can run about a buck apiece. But the technology allows for almost limitless possibilities.

At the retail level, stores can use iBeacons as a means to draw the customer inside. Once within a beacon's wireless region near the entrance, a retailer can transmit a coupon or sales promotion that could beckon potential customers. And once inside the store, several indoor beacons can triangulate a customer's position and allow the shopper's micro-location to trigger information on the products he or she is near. (iBeacons' developers used a museum tour as an example.)

But coupons and sales promotions aside, this has the potential to revolutionize mobile payments. Forget kiosks at the register. Heck, forget lines at the register. If a smartphone is within range, iBeacons has the ability to scan barcodes with the camera, itemize your products, and pay for them with a tap on the screen (or in this case, a fingerprint sensor).

Or let's say you're a repeat customer at Starbucks (NYSE:SBUX) and never deviate from a usual order. iBeacons can sense once you enter a location, immediately alert the baristas to start fixing your triple iced espresso, and have it ready by the time you're ready to pay.

But retailers are just a small fraction of the big picture. Perhaps the biggest thing on the horizon, something that NFC couldn't quite get a foothold in, is home automation. It's one thing to have a set of actions, like switching on lights or firing up Netflix (NASDAQ:NFLX), when a phone connects to a home Wi-Fi. But it's a whole new world to have your phone know which room you're in without having to tap an NFC tag at each door frame.

So why did Apple keep mum about iBeacons when it unveiled the iPhone 5S?

Well, it's not quite ready for primetime just yet. Although iBeacons has the makings for massive innovation, it still requires the backing of third parties to install the pricey sensors in their shops and homes. It's one of the main reasons why NFC never quite took off. Estimote, one of the main companies to develop the beacons themselves, hopes to begin releasing its products early next year.

Also, BLE is not proprietary to Apple. As of Android 4.3, Google also supports the technology. It can -- and most likely will -- launch its own version of iBeacons that will probably be compatible with some of the very same sensors that will be released. While that's great for the end user, Apple would obviously prefer to be the best in the field and will continue to improve upon the system until it finally believes it's ready.

And finally, perhaps the coolest reason: iBeacons isn't exclusive to the iPhone 5S. Since it runs on iOS 7, iBeacons will be available for iPhones all the way back to the iPhone 4S and provide the same functionality for a wide swath of users. So, yes, it's a major iPhone 5S feature that arguably outshines fingerprint sensors and gold trims, but you needn't run out to buy the new device to get iBeacons once iOS 7 is released to the public.

Last week's iPhone unveiling was fraught with disappointment, and for good reason. But once iBeacons is ready for a full-on demo, that lackluster stage show will be a distant memory.

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