Apple finally announced their entry into the payment services business with the launch of ApplePay:
There have been many attempts to develop a truly mobile wallet that is really useful and works from Google, MasterCard and VISA which have been failures in many different ways. The new offering from Apple combines:
- Near Field Communication to communicate with the POS terminal
- Touch ID (the button on the iPhone that recognises the owner’s fingerprint)
- Secure Element a new chip in the iPhone 6 to store all the payment information encrypted that secures all the user’s ID, card number, etc.
- Passbook an Apple App which stores all sorts of documents including details of all credit and debit cards
built into the new iPhone 6 to enable payment in the store at the push of the Touch ID, see below:
Source & Copyright©2014 - Apple Inc.
The security in ApplePay is integrated across the hardware and software so that Apple have been able to develop a new payment method in which:
- card number is not stored on the phone, instead a version of the card number is held in the Secure Element
- each time an ApplePay user pays the iPhone generates a one time payment number with the merchant plus a dynamic security code for that transaction
- if the phone is lost, iPhone holders can use Find My iPhone to suspend all payments from that device. AND because the card details are not stored on the phone there is no need to cancel the credit cards.
This is way more secure than current methods. Also, it easy to understand why the banks have accepted that this is a card present transaction which has a lower merchant service charge.
Not only this new level of security, Apple stressed that shopping will be more privates as they do not record what you bought, where you bought it, and how much paid for it. Also the cashier does not see your name, credit card number and security code.
Global roll out and support
Apple globally have 800 million + card accounts held in their iTunes store and clearly intend to enable all of them on ApplePay. For now they are starting in USA with debit and credit cards from Amex, Discover, MasterCard and VISA. Plus the biggest card issuers in the US to covering 83% of the card purchase volume in the US. ApplePay will be immediately usable in 220,000 merchant locations in USA. Many large merchants have signed up including Macy’s and bloomingdales with many more to follow.
These are impressive numbers, however much more impressive is the support from key bankers, the card payment systems and from competing systems/apps:
- “We are working closely with Apple and with our member banks to bring this new service to market in Europe,” said Steve Perry, chief digital officer at Visa Europe
- “Everyone wins,” said Jamie Dimon, chief executive of JPMorgan Chase in one of a series of glowing statements from bank CEOs, according to the Financial Times.“ While in February he said “[They - Apple, Facebook and Google)] all want to eat our lunch. I mean every single one of them, and they’re going to try.”
- PayPal-owned Braintree has announced that it supports Apple Pay, meaning that Braintree is set to be capable of processing Apple Pay transactions if customers choose to accept Apple Pay in their app.
CTMfile take: MobileApple Pay introduces new levels of easy of use, and, most importantly, security and privacy. It sets the standard for how mobile payment systems and wallets will develop, and opens the door to a massive increase in mobile payments as consumers will feel more confident and secure. However, it is bad news for PayPal and similar players, and for pre-paid card as their unique functionality has been replaced by easier and better experience for wealthy consumers which is why Apple Pay will be accepted by many retailers world-wide.
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