Take A Bite Out Of Apple Pay     

                                               

 

Q: I’ve heard a lot about Apple Pay lately. I’m an enthusiastic Apple user, so I’m excited to hear about merging my wallet into my cell-phone. What is it, and how can I get in on it?

A: Whether you love Apple’s user-friendly and reliable products, or hate the price tag and the status symbol they represent, you’ve got to admit: they know business. Apple saw the future of finance and the future of technology rapidly merging and figured out a way to cash in on it. The new iPhone 6 comes with a new technology that’s set to change the way you pay for things. They’re capitalizing on that new technology with a payment system of their own: Apple Pay. Apple Pay is taking advantage of two new developments in payment infrastructure to save you time.

First, the technology. Apple’s iPhone 6 comes equipped with a near-field communication (NFC) capable chip. Near-field communication uses very short wavelength wireless technology to share information between appropriately equipped devices over really short distances. It’s like a WiFi network that only has a range of a few feet. While there are all kinds of neat potential applications for near-field communication devices (wireless access control could tie your door locks to your cell phone, for example, and automatically open the door for you when you walk up to your house), the biggest one at the moment is the payment infrastructure.

The release of Apple Pay also corresponds with a new standard of credit and debit card security, the Europay-Visa-Mastercard (EVM) security chip. The EVM chip is a small electronic device embedded into cards that contains a method for generating a unique identifier for encryption protocols. Think of it as a code generator that makes a new PIN for each transaction. EMV technology uses more secure encryption standards to protect financial data at point-of-sale terminals. The increasing urgency of its adoption is brought on, in no small part, by the recent security breaches at Staples, Target, Home Depot, and other major US retailers.

Apple Pay, then, is an attempt to combine both technologies within a device you already carry around. The iPhone 6’s NFC chip is capable of broadcasting an EVM signal. It takes both of these new payment technologies and puts them together to make a more secure payment infrastructure.

Apple will profit from this system if adoption is sufficiently widespread. Apple will charge card-issuing institutions (like Visa or Mastercard) a portion of the fee those companies charge retailers on every transaction. Card companies are hopeful that the increased security of their payment processing system and the greater convenience of pay-by-phone will encourage more people to spend more money, growing their businesses as well. If they’re right, it could result in significant gains for both Apple and the card companies. This profitability also explains the growing competition in NFC payment infrastructure development.

Apple Pay is by no means the only attempt to combine these technologies. Android-based smart phones have had limited success with Google Wallet, although the lack of standardization across Android devices holds back attempts to develop secure payment infrastructure. Wallet, unlike Apple Pay, also requires the download of a separate app, and only the most recent iterations of the Android OS support tap-to-pay.

A group of merchants called the Merchant Customer Exchange, a group that includes CVS, Rite Aid, Target, and Wal-Mart, are working on their own system called CurrentC. CurrentC uses visual barcodes to secure transactions in an entirely different way, and the system isn’t widely used outside those retailers. The group is so dedicated to the project that it is prohibiting retailers that participate in the exchange from accepting Apple Pay.

Apple Pay may be the most successful mobile payment solution in terms of widespread adoption. It will only work with the iPhone 6, because older models lack the necessary NFC equipment. If you already have an iPhone 6, though, you only need to use the pre-installed Passport app. There are simple, on-screen instructions for adding a debit or credit card. 

Early adopters report some hiccups in the payment process, though. The technology is still very new, and delays and payment failures occurred at the first big roll out for the technology. Both AT&T Park and Kauffman Stadium, the sites of the 2014 World Series, were using Apple Pay for transactions around the stadium. In most instances, the process worked as advertised, but, as with any technology, a few glitches prevented people from using Apple Pay consistently. Some people still resorted to credit cards or cash to avoid inconvenience.

The technology to accept Apple Pay payments isn’t everywhere yet. In fact, only about 2.4% of retailers have the facilities to accept pay-by-phone. However, the change is coming. By October 2015, every shop that accepts Mastercard or Visa will have to be using EVM technology, and it’s likely that this upgrade will include NFC equipment. For now, you’ll want to hold on to your wallet, but the future looks bright for this great advancement.