Apple is taking aim at the credit card’s five-decades-old magnetic strip by promising to allow customers pay for transactions with their iPhones and Watches.
What is Apple Pay?
It allows users to pay for items in-store using the latest iPhone or Apple Watch. All a customer needs to do is hold the gadget next to a reader at the till to pay for a product.
With an iPhone, the user will also have to press their finger on the phone’s “home” button, which doubles as a fingerprint sensor. This will verify that the purchaser is the owner of the device. With the Watch, the user will have to double-click a button on the timepiece to ensure the payment goes through.
So it’s a bit like those “contactless” credit cards?
Yes. Apple is using the same system — NFC (near field communication) technology — that is used for “contactless” payments. But instead of having to take a card out of a wallet or purse, the customer can just tap their iPhone or Watch.
What about online shopping?
In that case, instead of typing one’s card details on the payments page on a website, the user can just tap the home button on their iPhone to indicate that they are making a payment.
Apple must have the user’s bank account details for this to work, right?
Yes, but they probably have the information already. For everyone who has an iTunes account — and millions do — Apple has their credit card details and those with an iPhone 5 can already make iTunes purchases with a fingerprint. However, a customer can also use a device’s camera to take a picture of their credit card. Apple will then scan the card, giving it all the information it needs for a payment.
How can this possibly be secure?
Apple says they will encrypt all the information, and that the device itself would not store card numbers or other financial data. That information will be held on Apple’s servers. This means someone could not steal a device and make payments or get hold of bank account details.
And this is all completely brand new, is it?
Not exactly. Lots of other companies, from Google to PayPal to Vodafone are creating “digital wallets” and believe that, in future, gadgets will be used to pay for things. However, the popularity of Apple and the demand for the latest iPhones and Watches may combine to help this technology take off in the mainstream.
— Financial Times
