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Why Apple Pay is Apple's most important product in years

Caitlin McGarry | Oct. 21, 2014
The technology that powers Apple Pay, near-field communications, isn't new or particularly innovative but Apple waited for the right time to turn the iPhone into a wallet.

apple pay logo

The dust is still settling after Apple's iPhone event, where we saw the stunning iPhone 6 and 6 Plus. Apple CEO Tim Cook said the phones broke sales records all over the globe. They're still sold out in every Apple store in New York City. (Believe me, I looked.) But the company's truly game-changing product of the year isn't a phone, or any piece of hardware. It's Apple Pay.

Apple built its reputation on stunningly beautiful, easy-to-use hardware and software. The iPod changed the way we listen to music, the iPhone changed the way we communicate, and the iPad changed the way we compute. OS X and iOS are both intuitive and aesthetically pleasing--and now they work together better than ever. But when it comes to services, Apple often falls short. Siri and Passbook feel like afterthoughts. Apple Maps was a complete failure. iTunes Radio...well, there's a reason why Apple bought Beats. Apple Pay is a different story.

When Cook took the wraps off Apple's mobile payments service last month, the financial world took note. The technology that powers Apple Pay, near-field communications, isn't new or particularly innovative. Android phones have come equipped with NFC for years. But Apple sat out the NFC trend, waiting for the right time to turn the iPhone into a wallet. That time is now.

Timing is everything
Google introduced its mobile payment app Wallet in 2011 as a tap-to-pay service for Android phones. The company was three years ahead of Apple, yet Android users aren't any closer to using their phones to make purchases. What's the hold-up?

Well, Google Wallet only works when an NFC-equipped Android phone is near a terminal that accepts MasterCard's PayPass (so you need a MasterCard). But even if you have an Android phone with NFC, some carriers restrict your ability to make contactless purchases. Why? Carriers like AT&T and Verizon back another NFC payment system called Softcard, which hasn't yet launched. Google struggled to get the ball moving on all fronts.

While Android phones were hamstrung with restrictions, Apple was biding its time as it nailed down partnerships with banks, credit card companies, and retailers. More than 500 banks and all major credit card companies are on board with Apple Pay. Convincing retailers to upgrade to NFC-compatible payment terminals isn't as hard a sell as it was a few years ago. Next year, all merchants will be required to install terminals that read chip-and-pin cards (which are already used in Europe) instead of conventional swipe cards to cut down on fraud. Those chip-and-pin terminals typically come with NFC baked in. Problem solved.


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