A closer look at Apple Pay: What is it and how can it change our future?

4 August 2016

Apple PayAvailable since October, 2014, Apple Pay is a contactless payment method developed by Apple Inc. as a more secure alternative to traditional magnetic stripe card payments. Apple Pay users can make payments within stores and within participating apps using the compatible versions of iPhone, iPad and Apple Watch.

According to Apple, in the first 3 days after the launch of the new payment system, over 1 million credit cards were registered in Apple Pay, and this number is growing steadily. In June, 2016, Apple told that a million new users register in Apple Pay each week, and that turns it into a leading mobile payment platform in the US.

Apple Pay is currently supported in 9 countries: Australia, Canada, China, France, Hong Kong, Singapore, Switzerland, UK and USA, but the expansion is going on. In the nearest time, the company is planning to provide contactless payment services in Europe: Spain, Italy, Germany, and Belgium.

So what is Apple Pay, how does it work and how can it change the way you shop?

Getting Started: Apple Wallet

To start using Apple Pay, you need to add your rewards, debit or credit card to the Wallet app (previously known as Passbook).  There are three ways to do it:  through your iTunes account by simply entering the card security code, by taking a photo of your plastic, or by entering all necessary information manually. If you have several Apple devices with Apple Pay, you need to add your card to each of them.

Apple encrypts and resends the received information to your card issuer to verify that you can use this card in Apple Pay. Typically, this process takes just a few seconds, but some banks may require additional information, so you will need to make a call or send an email to complete your verification process.

You can add up to nine different cards to your Wallet. The service also lets you track your last 10 purchases – however, while some banks reveal information about all payments made with the corresponding debit or credit card, others allow users to check only transactions made from their Apple Pay devices.

Making Payments Online & Offline

After being set up, Apple Pay can be used to make everyday purchases with a single touch. You can make payments at contactless points of sale (with your iPhone or Apple Watch) and within apps (with your iPhone and iPad). In addition, with the release of iOS 10 and macOS Sierra, Apple is going to integrate Apple Pay to Safari to get more chances to convince users to use Apple Pay.

According to Apple’s website, Apple Pay is accessible at over 200,000 retail stores, including their own store and such popular brands as Bloomingdales, Macy’s, Whole Foods, McDonald’s, Sephora, Nike, Best Buy, and many others. To make a payment, you need to hold your device in front of a contactless payment terminal and place your finger on the Touch ID sensor of your iPhone or double-click the side button of your Apple Watch.

To pay in an application like AirBnB, Uber, Groupon, Etsy, or Apple Store, you need choose Apple Pay as the method of payment, check that your payment and shipping information is correct, and then authorize your payment with Touch ID. To attract new app developers, Apple has published reference documentation allowing them to perform a number of publishing and management tasks.

Is Apple Pay Safe and Secure?

To keep transactions highly secure, Apple uses the “tokenization” method created by EMVCo. When you add a card to your Wallet, the card issuer labels it with a unique device-specific token called a Device Account Number (DAN), which is stored in the hardware of your iPhone, iPad or Apple Watch and replaces your actual credit card number.

When you make a payment using Apple Pay, your transaction is validated with the one-time unique dynamic security code generated specifically for this transaction. And since you don’t need to show your plastic card to the cashier, its number, security code and your identity information can’t be stolen.

Another feature that makes Apple Pay more secure than other payment methods is biometric authentication through TouchID. Your fingerprint serves as an additional layer of protection to keep your sensitive payment information safe and sound. And if your smartphone is lost or stolen, you can use the Find My iPhone option to remotely lock your device.

And What is the Future of Apple Pay?

Despite of all its advantages, ApplePay faces some serious problems that won’t allow this payment system to become no.1 in the world. First, the number of retail partners supporting the new contactless payment method is still limited. It takes time and money to install NFC-enabled terminals at all retail locations.

Then, your card issuer has to support Apple Pay. The US has over 600 banks and credit unions working with the Apple Pay system, but other countries lack this support. For example, in France Apple Pay works with plastic cards from four financial institutions – Carrefour Banque, Caisse d’Epargne, Banque Populaire, and Ticket Restaurant. In Australia, only American Express card holders can use Apple Pay.

Similar to Samsung Pay and Android Pay, Apple Pay is not universal. Since it is specifically designed for use on Apple devices, it will be difficult to spread its influence in countries where the Apple brand is not so popular. All those people with Android and Windows phones or with older versions of iPhones will significantly reduce Apple’s market share.

Additionally, even though Apple Pay offers two-factor identification, the idea of “total protection” is still in question. Many people remember the “Celebgate” breach, when hundreds of private photos of celebrities were released. These images were obtained in the result of a security issue in the iCloud API, and that case made Apple users feel unsafe.

Of course, Apple has renovated the market of mobile payments in the United States, but it’s not time to say goodbye to cash and plastic cards. To get widespread acceptance, Apple Pay has to be accepted everywhere you go, and here is the problem. But even though Apple Pay won’t replace your wallet or purse in the near-term, it has a huge potential to revolutionize and promote mobile payments.


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