Apple announced its anticipated payment service, Apple Pay, which sees support for contactless payments via NFC, as well as enabling other online transactions.
Tim Cook, Apple’s CEO, said: “It’s all about the wallet. Our vision is to replace this, and we’re going to start by focusing on payments.”
Describing the current model as a “fairly antiquated payment process”, he noted: “Whether it’s a debit or a credit card, we are totally reliant on the exposed numbers and magnetic strip interface, which by the way is five decades old, and the security codes which all of us know aren’t so secure.”
The Apple head also detailed why he believes other payment initiatives have struggled with success. “It’s because, as it turns out, most people who have worked on this have started out by creating a business model that was centred around their self interest, rather than focused on the end user experience. We love this kind of problem – it’s exactly what Apple does best,” Cook observed.
Apple Pay sees the Cupertino company embracing NFC for the first time – it has not been present in iPhones before the new iPhone 6 and iPhone 6 Plus. In a statement, it claimed a “groundbreaking NFC antenna design”, which is alongside a dedicated secure element, and its Touch ID fingerprint technology.
When a credit or debit card is added to Apple Pay, the actual card numbers are not stored on the device or on Apple’s servers – which following recent reports of an iCloud security breach, comes as some consolation.
Instead, a unique device account number is assigned, encrypted and stored in the secure element. Transactions are authorised with a one-time unique number based on this device account number and instead of using the security code from the back of the card, a dynamic code is used to validate each transaction.
Apple will allow customers to use details already on file from an iTunes account, noting that this opens the service to “hundreds of millions” of people. Alternatively, card details can be captured using the camera.
“When you’re using Apple Pay in a store, restaurant or other merchant, cashiers will no longer see your name, credit card number or security code, helping to reduce the potential for fraud. Apple doesn’t collect your purchase history, so we don’t know what you bought, where you bought it or how much you paid for it,” said Eddy Cue, SVP of Internet Software and Services for the company, in a statement.
Apple Pay supports debit and credit cards from American Express, MasterCard and Visa, issued by banks including Bank of America, Capital One Bank, Chase, Citi and Wells Fargo – representing 83 per cent of the card purchase volume in the US.
The iPhone maker trumpeted that it will work across more than 220,000 merchant locations across the US, where contactless payments are accepted.
But Apple Pay will also go beyond contactless payments. It is also available for online shopping, with users able to pay for goods and services using Touch ID, without the need to input payment or shipping information.
The service is initially available in the US, although Apple has also said it is looking to expand this worldwide.
Apple Pay also works with the iPhone maker’s new smartwatch, extending the service to owners of smartphones from the iPhone 5 onwards – as long as they have bought the $350-plus wearable.