Apple Pay (stylized as Apple logo black.svgPay) is a mobile payment and digital wallet service by Apple Inc. that lets users make payments using the iPhone 6, iPhone 6 Plus, Apple Watch-compatible devices (iPhone 5 and later models), iPad Air 2, and iPad Mini 3. Apple Pay does not require Apple-specific contactless payment terminals and will work with Visa's PayWave, MasterCard's PayPass, and American Express's ExpressPay terminals.[1] The service has begun initially only for use in the US, with international roll-out planned for the future.[2]

Service

Apple Pay is a mobile payment service that lets certain Apple mobile devices make payments at retail and online checkout. It digitizes and replaces the credit or debit magnetic stripe card transaction at credit card terminals. The service lets Apple devices wirelessly communicate with point of sale systems using a near field communication (NFC) antenna, a "dedicated chip that stores encrypted payment information" (known as the Secure Element), and Apple's Touch ID and Passbook.[3] The service is compatible with the iPhone 6, iPhone 6 Plus, and the Apple Watch. Users with iPhone 5, 5C, 5S, 6, or 6 Plus can use the service through an Apple Watch, though the watch lacks the added Touch ID security.[3] By default, Apple Pay is disabled, and the owner must enter a code to enable Apple Pay after putting on the watch. The watch's sensors will then ensure that it is still being worn by its owner. If the watch is removed at any point, then Apple Pay is disabled again.[4]

The service keeps customer payment information private from the retailer, and creates a "dynamic security code [...] generated for each transaction".[3] Apple added that they would not track usage, which would stay between the customers, the vendors, and the banks. Users can also remotely halt the service on a lost phone via the Find My iPhone service.[3]

To check out at brick and mortar stores, users hold their authenticated Apple device to the point of sale system. iPhone users authenticate by holding their fingerprint to the phone's Touch ID sensor,[3] and Apple Watch users authenticate by double clicking a button on the device.[5] There will be 220,000 participating vendors at the time of launch, including department stores Macy's and Bloomingdales, drugstores Walgreens and Duane Reade, restaurants Subway and McDonald's, and other retailers including Target and Whole Foods.[6][7] To check out online in supported mobile apps, users choose "Apple Pay" as their payment method and authenticate with Touch ID.[3] Groupon, Panera Bread, and Uber apps will be compatible with Apple Pay at the service's launch. Users can add credit cards to the service in any of three ways: through their iTunes accounts, by taking a photo of the card, or by entering the card information manually. The service currently only works in the United States, though Apple plans to expand to other countries, including the UK in July 2015.[3][8]

History

The service was announced at Apple's September 9, 2014 iPhone 6 event. At its announcement, Apple CEO Tim Cook described the magnetic stripe card payment process as broken for its reliance on plastic cards' "outdated and vulnerable magnetic interface", "exposed numbers", and insecure "security codes".[3] He positioned Apple as in a place to fix it. The iOS 8.1 software update accompanying the service's October 2014 launch activated Apple Pay on iPhone 6 and iPhone 6 Plus.[3] The Apple Watch will support Apple Pay.[5]

The service was in preparation for "a long time", as Apple acquired startups, hired executives, and filed patents related to payments.[3] Apple partnered with American Express, Mastercard, and Visa. Their joint project began in January 2013, though they had discussed Apple's potential involvement for years. Their joint solution was a system where single-use digital tokens would replace the transfer of personal information.[9] A Visa executive said that 750 people at the company worked on the anonymized "token" system for a year, and the other partners had similar teams in collaboration.[10] MasterCard began work on the project in 2013 and hoped that their joint work would become a "standard for mobile payments".[10] The announcement of the service came at a time when MasterCard and Visa policy created strong incentives for upgrading to mobile payment-compatible point of sale systems.[3] Apple then approached several big banks in mid 2013 and did not divulge the names of the other banks. JPMorgan made a windowless "war room" for the sensitive details. Of their 300 people on the project, about 100 knew that the partner was Apple. Others close to the project did not know it was named "Apple Pay" until the announcement. The company's participation remained a secret leading up to its announcement.[9]

Apple assumes some liability for fraudulent use of the service.[3] Banks are expected to carry the burden of the service, and Apple is said to have a negotiated smaller transaction fee. In turn, the banks hoped to capture purchases that were formerly handled without credit.[9] Financial Times reported that Apple receives 0.15% cut of purchases made with the service.[11] The company announced an API for app developers to build Apple Pay checkout into their apps.[3]

Reception

Journalists noted the multiple previously unsuccessful efforts of other retailers to build mobile payments services,[3][10] including those of PayPal, Wal-Mart, Target,[3] Google Wallet, and Softcard.[10] They noted that previous efforts did not solve customer inconvenience issues, and felt that Apple Pay potentially did.[3] The Verge‍‍ '​‍s Adrianne Jeffries noted that mobile payment market fragmentation was partially due to Apple's refusal to enter the market. Businessweek‍‍ '​‍s Joshua Brustein added that Apple has a history of letting "first movers fail" with an early version of the service before releasing "a more polished version of the same idea".[3] The Verge‍‍ '​‍s Dieter Bohn called Apple Pay the "week's most revolutionary product" over the iPhone 6 Plus and the Apple Watch announcements.[10] He called the announcement "a classic Apple moment of simplification and integration", and the partnership between payments services and Apple "a rare piece of collaboration and agreement".[10] He predicted that the service's effect on the mobile payments industry would be similar to the iPhone's effect on the smartphone industry.[10] Nathaniel Popper of The New York Times referred to the banks' level of coordination with Apple as "elaborate" and indicative of mutual "preparation and investment".[9] Some analysts added that the service could reduce the standard credit card transaction fees over time, since fees traditionally cover credit card fraud. The banks were willing to work with Apple in the face of efforts like Bitcoin and the Merchant Customer Exchange, which seeks to work around the card networks. Merchant Customer Exchange companies Walmart and Best Buy announced that they would not support Apple Pay in their stores,[9] however, Apple pay-equipped devices will still operate in any store that complies with industry standards for NFC-based payments, regardless of whether an explicit agreement with Apple exists or not.[12]

Early reviews of the service regarded it as easy to use, but were not sure whether the service would become widely adopted.[13][14] The Verge‍‍ '​‍s Nilay Patel wrote that the product demo was "remarkably smooth" and "a cohesive user experience".[13] Patel said the process took five to ten seconds at a retail card reader, and added that it may be less smooth at stores such as Walgreens, where cashiers prompt customers for loyalty cards and charity donations.[13] The New York Times‍‍ '​‍s Neil Irwin wrote that Apple exaggerated the inconvenience of credit cards. Among the plastic card's benefits, he included how others could make purchases on another's behalf and how dead cell phones could leave the owner stranded.[14]

Several reviewers noted that a recent Apple-related leak of some celebrities' private, nude selfies could hurt the company's public trust with private information.[3][15] Apple had responded that the leaks were due to weak passwords and not a data breach.[3] The Verge wrote that the physical security measures could help build trust despite the relative insecurity of the average consumer's data.[3] Irwin of The New York Times added that payments companies were invested in new forms of security following the high-profile data breaches at Target and Home Depot.[14]

Adoption

Apple CEO Tim Cook announced on October 27, 2014, that more than 1 million credit cards have been registered on Apple Pay in the first 3 days of its availability,[16] making it the largest mobile payment system as of yet.[17]

Adoption of Apple Pay has been hindered by mobile payments industry opposition, particularly the Merchant Customer Exchange (MCX), who is trialling a competing system known as CurrentC for launch in 2015, which uses QR codes and verification codes and is designed primarily to prevent the merchants from paying credit card transaction fees. Shortly after its unveiling, Best Buy and Walmart intitially stated that they would not accept Apple Pay, while CVS Pharmacy and Rite-Aid silently disabled all NFC payment systems in late October 2014.[9][18][19]

Walt Disney World began accepting Apple Pay at its Orlando-area theme park and resort, starting from December 24, 2014.[20]

In 2015 Best Buy and Target announced that it would start accepting Apple Pay for in App purchases, and make it available in all stores, by the end of 2015. However it further stated they both will still remain involved with MCX.[21]

See also

References

  1. ^ Turner, Adam (September 10, 2014). "Apple Pay gives tap-and-go a much-needed shove". The Sydney Morning Herald. Retrieved September 11, 2014. 
  2. ^ "Apple - Apple Pay". Apple. Retrieved November 3, 2014. 
  3. ^ a b c d e f g h i j k l m n o p q r s t Jeffries, Adrianne (September 9, 2014). "Apple Pay allows you to pay at the counter with your iPhone 6". The Verge. Vox Media. Archived from the original on September 13, 2014. Retrieved September 13, 2014. 
  4. ^ "Clever trick will safeguard Apple Watch from thieves". Cult Of Mac. September 10, 2014. Retrieved November 10, 2014. 
  5. ^ a b D'Orazio, Dante (September 9, 2014). "Apple Watch works with Apple Pay to replace your credit cards". The Verge. Vox Media. Archived from the original on September 13, 2014. Retrieved September 13, 2014. 
  6. ^ Perez, Sarah (September 9, 2014). "Apple Announces Mobile Payment Solution Called Apple Pay". TechCrunch. AOL. Archived from the original on September 22, 2014. Retrieved September 22, 2014. 
  7. ^ Snider, Mike (September 9, 2014). "Apple hopes to jump-start mobile payments with Apple Pay". USA Today. Archived from the original on September 22, 2014. Retrieved September 22, 2014. 
  8. ^ Tom Warren (June 8, 2015). "Apple Pay arrives in the UK next month with support for London's transport system". The Verge. 
  9. ^ a b c d e f Popper, Nathaniel (September 11, 2014). "Banks Did It Apple’s Way in Payments by Mobile". The New York Times. Archived from the original on September 15, 2014. Retrieved September 15, 2014. 
  10. ^ a b c d e f g Bohn, Dieter (September 10, 2014). "Apple Pay was this week's most revolutionary product". The Verge. Vox Media. Archived from the original on September 13, 2014. Retrieved September 13, 2014. 
  11. ^ Fiveash, Kelly (September 13, 2014). "Apple Pay is a tidy payday for Apple with 0.15% cut, sources say". The Register. Archived from the original on September 13, 2014. Retrieved September 13, 2014. 
  12. ^ Rogowksi, Mark (October 20, 2014). "Apple Pay Is Here And It's Going To Be Great: Why The Skeptics Have It Wrong". Forbes. Retrieved October 21, 2014. 
  13. ^ a b c Patel, Nilay (September 9, 2014). "Apple Pay hands-on: is this the future of payments?". The Verge. Vox Media. Archived from the original on September 13, 2014. Retrieved September 13, 2014. 
  14. ^ a b c Irwin, Neil (September 10, 2014). "Apple Pay Tries to Solve a Problem That Really Isn’t a Problem". The New York Times. Archived from the original on September 14, 2014. Retrieved September 14, 2014. 
  15. ^ Brandon, Russell (September 9, 2014). "The most important feature Apple didn't talk about today". The Verge. Vox Media. Archived from the original on September 13, 2014. Retrieved September 13, 2014. 
  16. ^ Worland, Justin (October 28, 2014). "Apple Pay Registers 1 Million Credit Cards in 3 Days". Time. Retrieved October 29, 2014. 
  17. ^ "Number Of Users On Apple Pay - Business Insider". Business Insider. Retrieved October 29, 2014. 
  18. ^ Constine, Josh (October 25, 2014). "CurrentC Is The Big Retailers’ Clunky Attempt To Kill Apple Pay And Credit Card Fees". TechCrunch. AOL Inc. Retrieved October 26, 2014. 
  19. ^ "Apple Pay goes offline at CVS, Rite Aid". Ars Technica. October 30, 2014. Retrieved October 30, 2014. 
  20. ^ Apple Pay rolling out at Disney World this week
  21. ^ http://www.4-traders.com/BEST-BUY-CO-INC-11778/news/Best-Buy--accepts-Apple-Pay-still-involved-with-MCX-20456268/

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