Apple recently released iOS 8.1 and with it, Apple Pay, their long-awaited solution to mobile payments. In the Passbook application, there is a new option for adding credit cards by either typing in your information or using the camera to scan a card. This information is then verified by your bank and saved to your phone. Your iPhone 6 or 6 Plus contains a “secure element”, which stores a device-specific number linked to your credit card which allows for secure payments without worry of someone in possession of your device stealing your number. During the actual payment process, Apple Pay allows you to make purchases with your credit card in a very secure fashion using a new concept called “tokenization”. Instead of wirelessly transmitting to the merchant your actual credit card number, a one-time payment number is generated by hooking into your credit card processor’s systems to make the purchase. This number is never used again in making a purchase, preventing packet sniffers from capturing this data to make purchases on your behalf.
An additional layer of security exists with Touch ID. Apple Pay payments can only be verified with a valid fingerprint on the device, disallowing thieves who have stolen your phone from accessing any secure information. In case your phone does get lost, you can use iCloud to revoke the device specific number tied to your iPhone, removing any chance of future payments made from that device. However, if your physical credit card gets lost/stolen and you need to replace it, Apple Pay automatically updates the card number in Passbook without any interaction for the user. This leads to a seamless experience for any iPhone 6 / 6 Plus user of Apple Pay.
Another benefit of Apple Pay is that Apple has worked directly with credit card issuing banks to tie deeper into their systems with their own apps. As soon as you make a purchase on your credit card, whether using Apple Pay or online, you can receive push notifications detailing the exact amount charged to your card. This can act as an early fraud detection system, alerting you to charges made that you are not aware of. At any point, you can open up the Passbook app and see the last few transactions with your card so you can check that the security of your card has not been broken. Considering the recent outbreak of online credit card theft, this feature is extremely important to protect you from unauthorized charges on your cards.
Making a purchase with Apple Pay is simple. After a cashier has finalized the balance of the items you wish to purchase, turn on your phone and place it near the payment terminal and a screen will pop up prompting you to pay with your default card. Your phone needs to be only within 5 inches of the terminal for the NFC chip to be activated. You can then verify the purchase with Touch ID, wait for the beep from the terminal indicating that the payment was successful and then you’re done. The entire process takes less than 5 seconds from start to finish.
Apple Pay is the first major introduction of contactless payments in the United States that is likely to get mainstream adoption. Already there are several retailers who support Apple Pay, with more coming soon this winter. And with the upcoming move to require payment terminal upgrades by October 2015 to support “chipped” credit cards over magnetic stripes, this means buying terminals with NFC support will also be paramount for retailers. In addition, Apple Pay support will also be coming to the Apple Watch, which will allow iPhone 5 / 5s / 5c users the ability to use Apple Pay as well.