Apple introduced a new payment service that could eliminate most physical and virtual credit card transactions. Apple Pay aims to speed up and secure the checkout process at retail stores, restaurants and online. Apple Pay was a major focal point as Apple executives unveiled the new iPhone 6 and the Apple Watch near the company’s headquarters in Cupertino today.
“Now, with just a touch, you’ve paid. It’s that fast, it’s that easy.” Eddie Cue, an Apple senior vice president, as he unveiled Apple Pay.
United States credit and debit card issuers are behind the times.. In many other countries, secure credit card microchips make it more difficult to steal card numbers and help prevent fraud. Apple Pay will leapfrog that technology by letting consumers tap their phones on payment terminals, protecting their credit card numbers, security numbers and even their names.
So how does this all work? The two new iPhone 6 models have a Near Field Communications (NFC) chip built-in. As the name implies, the NFC wireless technology only works over very short distances. Apple’s Passbook app will work with the card to transmit credit card info to stores’ payment terminals when users tap their iPhone 6s against them. Payments are secured with Touch ID, Apple’s fingerprint security feature first introduced on the iPhone 5s.
Apple Pay will use credit cards that are already registered with iTunes Store accounts. Those that want to use a different card can register any American Express, MasterCard or Visa card with Apple Pay by snapping a photo of it from within the Apple Pay app. Credit cards will be stores in Apple’s Passbook
To further protect shopper’s privacy, full credit card numbers will not be stored by Apple. Instead, Apple Pay will create one-time-use credit card numbers that will be transmitted to a merchant. Merchants will not be able to transmit information back to Apple regarding your purchases. That means shoppers won’t have to worry about Apple snooping on their shopping habits.
Another benefit of using Apple Pay is that an iPhone can be disabled for payment should it be stolen or go missing. That means you won’t have to ever cancel your credit cards if such an incidence occurs.
NFC terminals aren’t as widespread to make leaving your credit cards at home a reality quite yet. There are approximately 220,000 NFC-enabled payment terminals in the United States today, according to Apple. To drive the adoption of NFC-enabled payment terminals, Apple’s partnered with some of the biggest retailers to install compatible terminals in time for the holiday shopping season. Launch partners include Macy’s, Sephora, Whole Foods, Walgreens, Disney, Duane Reade, McDonald’s, Subway and others. Naturally, Apple retail stores will accept Apple Pay as well.
According to Apple, there are currently $1 billion in online transactions today and the checkout process is daunting. Apple Pay will make it possible for iPhone users to check out with their Apple Pay with just one tap. App developers will be able to integrate Apple Pays into apps. Some developers have already baked that feature into their soon-to-be released app updates. For example, Major League Baseball’s At Bat app will allow fans to purchase game tickets right from their phones, then add them to Passbook. This will make transactions on apps like Uber significantly easier for customers to use for the first time since users won’t have to create a new account and manually enter payment info.
One key partner Apple executives mentioned during the keynote is Opentable, a company that dominates the online restaurant reservation space. Restaurants equipped with Opentable systems will be able to accept Apple Pay payments rather than forcing customer to do the “check please” shuffle and handing over credit cards to waiters. Devices called “skimmers” are sometimes used by unscrupulous waiters and service personal to steal the information stored in the magnetic stripes on the back of credit cards. The decades-old stripe leaves customers vulnerable to having their cards cloned or used online without their authorization.
Apple Pay will be part of the free iOS 8 update, which is arriving soon.