After years of swirling rumors and reports around it, the Californian tech giant finally unveiled its intentions to introduce a mobile payments platform with the goal of modernizing the way customers shop with credit cards.
The new service, dubbed Apple Pay, was announced during Apple’s big media event on Tuesday. The platform uses Near Field Communication (NFC) to enable users to make payments in stores simply by swiping their phones.
Tim Cook, Apple’s Chief Executive Officer, introduced the npvelty noting that most consumers and businesses still rely on a “fairly antiquated payment process,” and one that isn’t as secure as many would hope. “We’re totally reliant on the exposed numbers,” Cook said in the presentation, “and the security codes that all of us know aren’t secure. It’s no wonder that people have dreamed of replacing these for years. But they’ve all failed.”
Apple Pay functions by letting users scan their credit cards, from MasterCard, Visa or American Express, and then upload that information into the Passbook app. Rather than rely on the traditional 16-digit credit card number, shoppers receive a digital token that is unique to each device and can only be used with that device.
“Making a payment isn’t the hardest thing in the world. What we think is more important if you are going to run a payments service on a massive basis is that you can support all the non-happy path transactions: supporting the customer, helping people when they’ve lost cards,” says Matt Dill, SVP of innovation and strategic partnerships at Visa, explaining the company’s decision to partner with Apple.
Apart from the tokenization plan, the company’s execs also noted that the user has the possibility to suspend payments from their iPhone if the device is lost or stolen. The hope is that these features can improve security by limiting the customer’s exposure.
“The payment option will also work with Apple Watch, the new wearable device unveiled at the event and expected to go on sale in early 2015,” Mashable reports. “Apple Pay will work at more than 200,000 merchants, including at stores from big names like Disney. The system will integrate into apps from Target, Groupon and OpenTable.”
“It’s a revenue opportunity. It’s a business model opportunity. It’s an integration point across multiple parts of their business and their partners’ businesses,” Van L. Baker, an analyst with Gartner, told reporters when asked about why Apple may embrace payments. “There’s just a lot of things that line up that says this is the right time to do this.”
Despite numerous rumprs claiming the contrary, the iPhone and iPad maked managed to stay clear of full-fledged mobile payments solution in recent years. Instead, it laid the tracks little by little: two years ago, the company introduced the Passbook application for storing coupons, tickets and loyalty cards. After that it unveiled to public the Touch ID fingerprint scanner and an API for it paving the way for more secure applications.
As many have pointed out, Apple also has some 800 million iTunes accounts, many of which have credit card information linked to it.