The whole idea with Apple Pay is to replace the antiquated payments process– the credit card scanner– with a more secure yet much easier to use process. With all the pieces in place, all you would need to do to buy something is to place your iPhone or Apple Watch in front of a credit terminal. The way it works is typical Apple.
Numbers Out Of Sight
First, you’ll add a new credit card to your iTunes account using the iSight camera. Once the credit card is stored on Apple Pay you’re ready to go.
Authentication takes place with the iPhone’s Touch ID. At participating stores all you’ll need to do is hold the iPhone in front of the credit terminal, select which credit card you want to use, and it’s done.
The clerk behind the counter will never see a credit card, card number, security number, or even your name.
Apple says it has lined up the major credit card companies in the U.S.; American Express, MasterCard and Visa, and many tens of thousands of stores from Subway to Target and in-between.
Other mobile payment systems already exist, but are cumbersome to use. Apple promises a simpler system, but there are a few major hurdles to overcome, the first being the archaic credit card transaction system in the U.S.
The second is a security issue. Apple has taken some heat thanks to the recently hacked iCloud accounts, but the iPhone has a built-in secure enclave to store data (including fingerprint data), and issue a one-time token to complete a purchase. If your iPhone is stolen, the Find My iPhone app can suspend all payments from the iPhone (which would likely not be compromised anyway, thanks to Touch ID).
Both Visa and MasterCard have provided incentives for merchants to upgrade their systems by the end of 2015. So, Apple Pay is coming, just not overnight, not everywhere, and not without a few issues, including educating customers and merchants.
The change in credit card purchase methods in the U.S. is fully a David and Goliath battle, but that seems to be what Apple does best.