Paying with Apple Pay

the technology that allows you to deposit a cheque by merely taking a picture of the cheque on a smartphone, thereby obviating the need for you to go to a branch to deposit the cheque. Apple Pay is a bit different though – it allows you to pay for purchases with a debit or credit […]

the technology that allows you to deposit a cheque by merely taking a picture of the cheque on a smartphone, thereby obviating the need for you to go to a branch to deposit the cheque. Apple Pay is a bit different though – it allows you to pay for purchases with a debit or credit card, but without the need for you to carry the card with you. Immediately after AP was launched, more than 500 major U.S. financial institutions had signed up for it, and Apple is boasting of almost 83% of the credit-card purchase volume in the U.S. Currently in the U.S. you can use Apple Pay service at 220,000 merchant locations. Although this number pales compared to the nine million U.S. merchants that accept plastic, the development is quite significant if we recognize that Apple Pay was launched only a week ago. It is quite understandable why banks will scramble to join the AP bandwagon. Banks do not want you to leave them for other banks that allow you to use your credit/debit cards on your newly-acquired iPhone 6 or 6 Plus device. Convenience and significantly improved security arising from the use of fingerprint authentication are two main attractions of Apple Pay.
To use AP service, merchants need to install the Near-Field Communication (NFC) technology. This column wrote on NFC on 1 October 2012 and on mobile payment methods on 5 August 2013. Mobile payment options include direct mobile billing, mobile web payments, online wallets, QR (Quick Response) code payments, and SMS-based transactional payments.
Near-Field Communication is an emerging technology that allows smartphones and other enabled devices to communicate with each other or with anything containing remote (powerless) tags. The NFC protocol allows smartphones to establish radio communication with each other when you bring them into close proximity, usually no more than a few centimetres. With this capability, you can swipe your smartphone at the checkout lane in the supermarket, wave it over a display at a stadium or railway station to pay for your ticket, or bump phones with a friend to share the latest games. NFC technology is revolutionizing the way we pay for purchases and share information.
Thus, an NFC-based payment method, such as Apple Pay, is contactless and is what is often referred to as Mobile Wallets. It uses NFC to pay for purchases made in physical stores or transportation services. Your payment could be deducted from a pre-paid account or charged directly to a mobile or bank account. Mobile Wallet is a sophisticated “tap-to-pay” or “wave-to-pay” technology. You do not need to log in to any websites and you can pay for your purchases by simply waving or tapping your phone. Mobile Wallet could also be a credit card reader (app) that has been pre-loaded into your smartphone or tablet, and you pay for goods without ever pulling out your wallets or phones. In some systems, face recognition technology forms a part of the package, such that when you walk into a store (located in the network), a register shows the picture of your face, which is used as authentication for payment. Pretty neat, isn’t it?
The deployment of NFC in Apple Pay is straight-forward. First of, you need to enter your debit/credit card information into your smartphone. You can pre-fill the card you have on file for iTunes. Also, you can enter additional cards by using your phone’s camera to capture the card’s numbers. Your phone is now ready to use for purchases. To pay for a purchase, put your phone near the credit-card terminal and lightly touch (with your thumb) the Touch ID fingerprint scanner on your phone. (You don’t even need to unlock your phone, it will “wake up” on its own.) A successful transaction debits your debit/credit card account with your bank. Note that there is no app to load into your phone, no button to click, and your fingerprint is the only confirmation needed. Also note that fingerprint authorisation works for anyone whose thumb has been registered on your phone. So, if your daughter’s thumbprint is stored in your phone, she will be able to use your phone to make Apple Pay purchases! Also note that ATMs do not yet support Apple Pay, although you might be able to withdraw cash from debit cards at some retailers. Apple Pay works with Visa, MasterCard, and American Express.
As mentioned above, Apple Pay is much safer than regular debit/credit card payments. With Apple Pay, your reliance on credit card numbers is taken away, thereby removing one of the easiest ways that thieves steal. Note that your debit/credit card number is never stored in your phone in Apple Pay. Instead, a unique number that’s a handle (proxy) for your credit card is stored on a part of the phone that is not backed up online. So, when you make a payment, the phone’s NFC chip sends over a one-time payment code – not your card number. If the merchant’s system is hacked, you are not affected because the store’s data does not contain your card number.
You can suspend payments using Apple’s “Find My Phone” app or website, if your phone is lost. Unless a thief has your thumbprint, he wouldn’t be able to make purchases with your phone. Finally, Apple tries to respect your privacy in Apple Pay: it doesn’t know the amounts of your purchases or what you buy.
The takeaway from this article is that, barely a week after launch, Apple Pay is being widely adopted in the U.S., with convenience and improved security being the main attractions.