September 2014, Exclusive to Paybefore
Tuesday in Cupertino, with great fanfare that included a famous political activist and his once renowned pop band, Apple introduced a product that will change all of our lives. They also introduced a watch.
But more importantly, the mobile wallet concept is now legitimate. Google Wallet and its ilk was an extended beta test for the idea by a select few technologists, phone nerds, and the curious few that cared to try it. But Apple Pay, as it is called, is the NFC-based payment method that will, in fact, make tapping your phone a common component of a retail checkout experience.
Oddly, for all the immense technical prowess of Google and Apple and their respective mobile operating systems, the business models of the two companies will lead to different results in this space. As with most important and strategic decisions in modern tech, it is the user data that really matters. Apple Pay isn’t just a payment system; it is a direct and clear differentiation from how Google and its Android partners treat personal data. Whereas Google collects and shares data in Wallet according to their own privacy policies (including vague areas where they retain the right to share information later), Apple has opted to create a system that removes the company from having transaction data to sell. Instead, financial information is stored in the rather sci-fi sounding Secure Element, an onboard encryption chip that is dedicated for this purpose in the new iPhones.
Along with privacy as an obvious top concern, Apple had to show that Pay is actually better than using a plastic card without requiring any effort from users. They accomplished this by generating a card number and dynamic security code, making the transaction more secure with no information exchanged visibly at the point of sale. Pay is easy to remotely disable if the phone is lost, and doesn’t require a replacement card when the phone is found or replaced. Most importantly, the patented TouchID sensor scans a users thumbprint, allowing an interesting new twist on security that goes beyond the common password.
With strong security measures in place, a simple and familiar user experience that includes one tap to enable a payment card for iTunes users, and a trusted, well respected brand, Apple just shifted the pressure to retailers that are holding out on NFC. Much like “cash only” is a great sign to post at your restaurant, bar, or store if you want completely alienate millennials, we are only a few years away from hearing “we can’t go there, I only have my phone on me” when the office lunch crowd is mixed between mobile wallet and legacy plastic card carriers.
But does Pay take other digital wallets along for the ride? Perhaps, as many people have only a basic understanding of data sharing or subscribe to some form of the everything is public anyway conspiratorial line of thought. As such, other wallets with less focus on privacy that don’t require an iPhone will benefit from Apple’s entree and the resulting uptick in NFC terminals. There are a lot of variables in play though, as the major players in digital wallets will now vie for customer loyalty and recurring use.
After surveying the payment landscape, Apple entered with a clear focus on protecting user data, securing their payment method with TouchID and making Pay easy to use. While the process itself doesn’t break much new ground, the mobile payments arena is much different today with Apple in it. After years of false starts and half-baked attempts, the mobile wallet is now a real thing with the most influential name in technology behind it.