The battle for dominance in the mobile payments space has only just begun. For years, Google Wallet, PayPal, Square, and a dozen others have tried to entice customers and retailers with the concept of contactless payments. None has succeeded. yet.
Now Apple will try to break the glass ceiling above mobile payments with Apple Pay, its own breed of payments based on Near Field Communication (NFC) technology. In the past, Apple has taken niche technologies and turned them into hugely successful products that appeal to mainstream users. We’ll soon find out if history will repeat itself; Apple Pay is set to launch by the end of this week.
In the meantime, we’ve put together a comprehensive guide with everything you need to know about Apple Pay and why mobile payments may be on the brink of going mainstream.
Setting up Apple Pay on your iPhone
Less than a week before Apple Pay goes live, 9to5Mac discovered screen shots of the Apple Pay setup in the iOS 8.1 beta. We now have a very clear idea of how to set up the system on the new iPhones.
- Download iOS 8.1
- Open the Passbook app
- Tap on Set up Apple Pay
- Add cards:
- Select card associated with iTunes gift card
- Confirm security code
- Scan new cards with iPhone’s camera
- Select card associated with iTunes gift card
- First card added is the primary card
Once you’ve added a credit card, you’ll be able to view your transactions, enable notifications for it, and have quick access to the bank’s app and phone number in case you have any problems. You can add up to eight different cards to the system.
Based on the leaked info, Apple Pay will automatically update when you get a new card, so you don’t have to enter the information all over again.
Another report from Bank Innovation hints that you may be able to switch between credit cards using Siri. For example, you could say, “Open my Bank of America credit card,” and the correct card would show up. The report claims that only Bank of America credit cards will work with Siri.
How Apple Pay works
Apple Pay should be as simple as a tap of your phone and the press of a finger. The tap-to-pay method already exists in American stores that have NFC-enabled terminals. Apps like Google Wallet, PayPal Here, and others have used tap-to-pay for years, but typically involve the added hassle of opening an app and entering your PIN.
It also works in Europe and other countries where Chip and PIN payments are more common. Cards with Chip and PIN (known as EMV — for Europay, MasterCard, and Visa — in the U.S) can simply be tapped against payment terminals in cafes, stores, and other locations to make small purchases. Now, iPhone users will be able to do the same, but without the annoyance of opening an app or entering any information.
Once you’ve set up Apple pay, you’re good to go. Here’s exactly how it works:
Step one: Walk into a store, select items, and head to cash register
Step two: Tap your iPhone to the NFC Point of Sale (POS) terminal.
- The NFC POS terminal connects to the Apple Pay app on your iPhone.
- The full credit card number is not stored in the phone, but shows up as a Device Account Number.
- The number combines with a secure transaction code.
Step three: Verify the payment with your fingerprint or a PIN you set up.
- The Secure Element chip in iPhone’s NFC hardware validates the transaction.
- The NFC POS terminal sees that you authorized the purchase.
- The merchant sends purchase info to the bank.
- The bank verifies the merchant, matches transaction data to your account/card info, and processes the payment.
Step four: Once the purchase is processed and approved, you get your receipt.
Leonard Speiser, the cofounder and President of Clover, a company that offers Point of Sale (POS) terminals and other forms of mobile payments, told Digital Trends that to succeed, Apple Pay must achieve two things: “Tap-to-pay has to be very fast and it can’t have a million steps.”
“The user experience is critical,” Speiser told us. “Apple has done a truly incredible job. It’s extremely fast and a magical experience.”
As an Apple Pay partner, Clover has had early access to Apple Pay. After much testing and working on improvements to how it works with Clover’s system, Speiser is very pleased with the service. He also told us about the other, less talked about aspect of Apple Pay: purchases made within apps.
“In places like restaurants and cafes, tapping to pay at a register just doesn’t make sense,” Speiser said. “Customers can use an app to pick items from the menu, order food, and pay with Apple Pay. There’s no need to type in your credentials – you simply place an order and pay. It will shave time off of visits to stores and restaurants and remove the bottleneck.”
Since Clover is an open platform, third-party developers can easily make apps that work with the Clover register and payment managing system, as well as Apple Pay. Businesses can either make their own apps or join a big app, like OpenTable.
In theory, you’d be able to open the app, order your coffee in advance, and pay with Apple Pay without ever having to wait for a server or stand in line. This is already possible at some places with Square Order and OpenTable. Anyone who’s used Uber will also be familiar with the process.
The only downside to this approach is that those who use Apple Pay could end up with a slew of apps installed on their phone. Luckily, as Mark Schulze — who’s in charge of business development at Clover — explained to us, since all the apps are using Apple Pay, you won’t have to enter your credentials into every app or create new accounts for each one. This also adds security.
“Apple has your info, which is encrypted and kept with your credit card companies – not the app developer, restaurant, or store. No one gets your credentials.”