Everything we know Apple's bet on mobile payments
More ambitious than the iPhone 6, more risky than the smartwatch, Apple's entrance into the mobile payments business promises to change the face of retail forever - if the company's bet pays off.
With Apple Pay, the company's goal is nothing less than to make the humble wallet obsolete. How does this system work? Will it really save us time at the cashier, or is it just another technological distraction? Here's everything we know so far about Apple Pay and Apple's leap into a whole new category of business.
Q: What is Apple Pay?
A: Apple Pay is what Apple is calling its solution for storing and using credit cards on the iPhone. With Apple Pay, customers will be able to go to their local McDonald's or Whole Foods and pay just by holding their iPhone close to a sensor. This will allow users to pay and leave the store within about 10 seconds, which will also help retailers move customers through in a more timely (read: profitable) manner, Apple says.
Q: How do I pay with Apple Pay?
A: To make a payment, you'll first need to add a credit card (or several) to your iPhone. You can start by importing the same credit card you have on file with Apple, but you're not limited to that one.
When you're ready to check out at a store that supports Apple Pay (more on that shortly), you'll hold your phone close to a card reader and touch your finger to the iPhone's fingerprint sensor to approve the transaction. Your card will be charged automatically.
Apple Pay also will make it easier to make mobile purchases on the Web. You'll be able to pay for your Uber, buy baseball tickets at MLB.com and order food from Seamless with one click.
Q: How are the cards stored? Is this thing safe?
A: The credit card information is stored on the iPhone itself in a special chip that Apple is calling the Secure Element. Your account numbers are never sent to any Apple servers, the company says, and not even the retailer can see it. Instead, the iPhone generates a proxy account number that it provides to the retailer. Then, for an extra layer of security, each transaction is protected by a uniquely generated code.
Requiring fingerprint authentication helps prevent thieves from paying with your iPhone in the event it gets lost - they're not likely to have your fingerprints on hand. This seemingly simple solution is made possible by Apple's highly integrated approach to designing software and hardware as a single package. Previous attempts at doing mobile payments have been hamstrung by questions about security.
Q: What if I lose my phone?
A: Apple says you can use iCloud's Find My iPhone feature to disable Apple Pay - another example of Apple taking advantage of an existing service.
Q:
A: With the recent news about iCloud breaches, should I trust Apple to keep my information safe?
There's always a risk. But Apple argues that its solution is a much better alternative to handing out your credit card number to retailers whose card readers can be hacked or to waiters who can copy your information. Because nobody is seeing your credit card information with Apple Pay, even if a Target-style hack affects a retailer, it won't have your account numbers on hand to give up.
Q: Apple Pay will be useless if nobody in the real world takes it. Where can I use it?
A: Apple's launching Apple Pay with a number of prominent retailers. Here's a partial list: McDonald's, Whole Foods, Babies R Us, Toys R Us, Petco, Macy's, Walgreens, Disney, Nike, Apple, Staples, Subway, Panera and Sephora.
Apple is planning on signing up more retailers by the end of the year. The company has struck agreements with all the major payment processors, such as Visa, MasterCard and American Express. If your credit card issuer is included here, chances are your card will work when the service launches next month: Bank of America, Citi, Capital One, Wells Fargo, Chase, American Express, Barclays, U.S. Bank, Navy Federal Credit Union, USAA and PNC.
Apple estimates that 83 percent of all credit card purchases will be compatible with the service.
Q: When is Apple Pay coming?
A: Apple Pay will be available next month as an update to iOS 8, which is itself coming on Sept. 17.
Q: Is anything else about my credit cards changing?
A: Nope. Your rewards will stay the same. You still can carry your credit cards with you, if you choose. The only thing Apple is offering here is the ability to use your phone instead of swiping the plastic from your wallet.