Apple unveils mobile payments platform, Apple Pay
Cupertino, Calif. -- Taking aim at other digital payment platforms such as PayPal, Apple on Tuesday released a mobile payment platform called Apple Pay that will let consumers pay for purchases using their iPhones — or the new Apple Watch. With the bold pronouncement “Wallet, your days are numbered,” Apple debuted the new service at its new products presentation in Cupertino, Calif., during which it also unveiled the iPhone 6, the larger-sized iPhone 6 Plus, and the long-awaited Apple Watch.
“Our mission is to replace your wallet, starting by focusing on payments," said CEO Tim Cook.
Starting in October, with iPhone 6 and iPhone 6 Plus, Apple Pay will be available in the United States as a free update to iOS 8. It works with the new iPhones via a near field communications (NFC) antenna design, Apple’s Touch ID fingerprint scanner, and a dedicated chip (called the “Secure Element”).
Apple Pay will also work with the new Apple Watch, extending the service to the owners of iPhone 5, iPhone 5c and iPhone 5s.
Consumers can add payment cards directly from existing iTunes accounts or snap a photo of a card using the phone’s built-in InSight camera to add other cards to their Apple Pay account. Card numbers are not stored or shared either on Apple servers or the user’s device, and the merchant never sees the number. Instead, Apple Pay generates a dynamic security code that replaces the static code on the back of the card and authorizes each individual transaction with a one-time unique number. Payment can be made with the swipe of a finger using the secure TouchID feature.
Apple says it will not be able to track any details of user purchases (other than the fact a transaction took place).
“Security and privacy is at the core of Apple Pay,” said Eddy Cue, Apple’s senior VP of Internet software and services. “When you’re using Apple Pay in a store, restaurant or other merchant, cashiers will no longer see your name, credit card number or security code, helping to reduce the potential for fraud. Apple doesn’t collect your purchase history, so we don’t know what you bought, where you bought it or how much you paid for it.”
To further bolster security, if a user loses their iPhone, instead of canceling their cards they can instead suspend Apple Pay on that particular device until it is recovered.
Apple Pay already has signed up a list of impressive processing partners, including American Express, MasterCard and Visa, and most of the nation’s largest banks.
Leading retailers that are partnering with Apple to accept Apple Pay include Bloomingdale’s, Disney Store, Duane Reade, Macy’s, McDonald’s, Sephora, Staples, Subway, Walgreens and Whole Foods Market. In addition, Apple Pay will work at the over 220,000 merchant locations across the nation that already accept contactless payments.
Apple is clearly taking aim at other digital payment platforms such as PayPal and cryptocurrency providers, and also obviously is competing to an extent with the recently released Amazon Fire smartphone for ownership of the mobile commerce device space. While Amazon has the advantage of a vast trove of built-in product data and some impressive virtual shopping capabilities, Amazon Fire’s instant purchase only works for Amazon. In contrast, Apple Pay is being accepted by numerous retailers.
Apple Pay also offers a huge existing user base and extreme ease and security of payment. Odds are that the market will support both Apple Pay and its various competitors, including good old-fashioned leather wallets, but look for Apple Pay to take a dominant position sooner rather than later.