Almost every year, Apple announces products and services. While most of the attention is drawn towards the devices/products, it's often the services that are revolutionary in nature. iTunes, iCloud, Siri, and now, Apple Pay.
The rumors/speculations about Apple working on NFC have been on-and-off for a long time. Apple put an end to years of speculation with Apple Pay: a system where you can pay through your iPhone 6, iPhone 6 Plus or the Apple Watch.
What is Apple Pay?
Apple Pay is Apple’s take on mobile, wireless payments using your smartphone. It works off a tech we know as “Near-field communication” (NFC). NFC is in itself not new. A lot of Android phones already feature NFC-capability. Apple’s a little late to the party but there is enough indication that it will probably steal the show in the coming months.
With Apple Pay, you can just put your iPhone 6/6 Plus or Apple Watch close to a NFC-reading machine and your payment will be done. No swiping of cards, no entering code, nothing. You just have to authenticate the payment (TouchID on your iPhone 6 and 6+).
How Apple Pay Works?
Apple Pay makes use of three things: your iPhone’s NFC chip (or Apple Watch's), the NFC-scanner (which stores will have installed) and a specific information that corresponds to your credit card data. (note that this is not exact credit card data).
When you checkout, you hold your iPhone near the scanner. No apps to open, no initialization. Just hold it, and hold your finger on the TouchID. The whole payment processing is over in a jiffy.
With the Apple Watch, you double-click the button under the Digital Crown and hold the Watch close to the NFC-scanner. Not that you should have an iPhone 5 (or greater) while you pay through Apple Watch.
Adding credit cards to your iPhone is easy. You use the stock Passbook app. You can either enter the credit card info manually or just click a photo of the card while setting up the new card in Passbook.
Where does this data go? How secure is this?
Secure Element and Device Account Number
Like how TouchID is stored in a secure enclave on the A7 chip (within your iPhone), the credit card info is stored in a zone called Secure Element within the A8 chip. The information resides on your iPhone and is not sent to cloud, according to Apple.
There's another tidbit here. The credit card info is not stored as it is. It is converted into what’s called Device Account Number – which cannot be used to get your credit card info. When the NFC-scanner reads this Device Account Number along with a dynamically generated passcode, it processes the payment. The retailer never gets to know what your credit card info is.
More on Privacy
At a time when privacy of data is at stake, Apple is trying hard to set a standard for its own regulations on privacy. Like the TouchID, Apple says the data about credit cards and the payments will remain totally private and “local.”
Your purchases are not tracked or logged by Apple. These reside on the Passbook app (locally, on your iPhone). None of your purchases can be tracked back to you – through Apple. We’re not sure about what the retailer can do though.
If your iPhone or Apple Watch is lost, you can quickly use Find My iPhone, put the device in lost mode to turn off Apple Pay.
Not Just Stores
Apple Pay is not limited to brick and mortar stores. Many apps have integrated Apple Pay as a payment option. This is basically a one-click payment method.
For instance, you can pay through Apple Pay in Starbucks app. You just tap on the Apple Pay button within the app (or choose Apple Pay as payment option) and authenticate with TouchID. Done!
Why Apple Pay Might Win
I see a lot of people mocking Apple for being late to introduce NFC in the iPhones. Apple sure takes a lot of time but they seem to try to set the stage before introducing a relevant technology.
Despite so many Android phones featuring NFC, the whole mobile payment ecosystem has never really taken off so far. Apple seems to have worked with a lot of retailers before bringing this feature to the consumers. With about 220,000 stores and counting (and add apps to that list), Apple is not really aiming at just the technology like how folks like Samsung do. It's trying to take it to the people in a usable way.
And that's one of the reasons why, to me, Apple Pay seems poised to be a success.