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What you need to know about Apple Pay

Ryan Faas | Sept. 10, 2014
Today, Apple introduced its mobile payment system — known simply as Apple Pay.

Star power

While Apple does bring some technology to the mobile payments industry that will help it gain traction, perhaps the biggest thing it brings is its name and ability to wrangle the disparate groups of partners needed to make the venture a success.

With a very large pile of cash on hand, over half a billion Apple accounts already linked to a credit or debit card to make purchases in its electronic stores, and its brand identity, the company is a negotiating powerhouse. It was able to land the deals needed to have broad acceptance of Apple Pay right out of the gate. What's remarkable about this is that Apple was able to gain such acceptance when even groups like Softcard that are made up of major players in the payments industry have failed. Also impressive, the company was reportedly was to get lower than typical fees from each of the payment processors.

Only for new iPhones and Apple Watch

One drawback to Apple's ambitions with Apple Pay is that it will work only on the forthcoming iPhone 6 and 6 Plus. Although there is strong interest in both devices, that will be a fraction of Apple's iPhone user base. This limited support comes because Apple is relying on NFC, a technology never implemented in an earlier iOS device, and the Secure Element of the A8 chip. Although Apple Pay will be broadly available at launch, it's likely to be at least a couple of years before it becomes a truly common or mainstream payment option.

Apple will also allow the Apple Watch, due out early next year, to be used as an Apple Pay device. Apple has confirmed that the Watch wearer won't need a phone to be present to use Apple Pay, and will have to authenticate the device using a passcode, but otherwise provided little detail on how the two new products will work together.

Pulling up the rest of the industry

Apple Pay's influence is likely to go beyond Apple devices. Since Apple is making use of existing POS technology for contactless payments, it's probable that other mobile systems may see a boost as well. There's no real reason that these terminals would function only with Apple Pay. Indeed some retail chains had originally deployed them for competing payment systems like Google Pay. The result of Apple's entrance into the market could be that mobile payments in general will see a rise in popularity.

Apple still does have a couple of potential mind share advantages, however. It has a big customer base — the iPhone represents more than 40% of U.S. smartphones. Its customers are generally already comfortable letting Apple handle some measure of transactions. Its business model places the end user as its primary customer, giving it a big advantage in customer data privacy  — as with HealthKit and HomeKit, it has no need or desire to see, mine, or sell its users' information most of its competitors. Apple even highlighted this during its event along with the fact that a cashier will never see any personal information during an Apple Pay transaction.


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