Throughout its history Apple has announced new products with increasingly extravagant events. Their highly anticipated event on September 9th was no exception. Many in the technology space watched live as they announced the iPhone 6, the long rumored Apple Watch, and a new service named Apple Pay. Throw in an appearance by legendary band U2, a live performance of their new music, and an announcement that anyone can download U2’s new album for free from iTunes, and it was heaven on earth for geeks worldwide.
Although the excitement leading up to the event was for the iPhone 6 and Apple Watch, there was little speculation that Apple would be entering into the mobile payments industry. Apple Pay was largely a surprise, and they didn’t focus on it nearly as much as the iPhone and Apple Watch. However, it will likely have a huge impact on consumer behavior, retailer IT requirements, and on Apple’s bottom line.
Back in January I wrote Just Take My Money Already in which I lamented how difficult it can be for customers to pay at cash registers. I wrote that Starbucks had a great payment model with their custom application which allows you to pay at any Starbucks by flashing your phone at their scanner. I argued that more retailers need to follow Starbucks’s lead. In particular, what consumers really need is a Starbucks-like payment app that is universally accepted by most retailers.
It looks like Apple listened. OK, I admit it; they didn’t listen to me because they didn’t ask me. But clearly they had already concluded the same thing - that our current payment options are fragmented and inefficient.
Apple has a history of forging into non-PC industries. Look at what they did to the music industry with iTunes and the iPod, and how they revolutionized the cell phone industry with the introduction of the first iPhone in 2007. Apple has now locked in on the mobile payments industry, an industry that Forester Research predicts will reach $100 billion in the United States within the next five years. Think they’ll have an impact on that industry like they did on music and phones? You bet!
To get started with Apple Pay you’ll add your existing credit or debit card by taking a picture of it or typing in the card information. Add as many cards as you’d like and pick one as the default. When it’s time to pay your phone or watch will receive notification of a pending payment. You’ll confirm payment via your fingerprint, and it’s done. No need to pull out credit cards, swipe anything, open up special apps, or even look at your phone. Once payment is made you’ll be notified with a subtle vibration and beep. Talk about convenient. Apple Pay also works for in-app purchases.
But is it secure?
Instead of transmitting your card’s information to the retailer, Apple will transmit an encrypted code. Your card stays in your wallet - or at home - so no one will be able to write down the card number, security code, or even see your name. Payment confirmation can only be made using fingerprints already registered to the phone. So even if someone takes your phone or watch, they cannot make a purchase unless you’ve pre-approved them by adding their fingerprint. And if your phone or watch become lost then you can remotely put them into lost mode and the card information will be wiped out.
As part of the Apple Pay announcement, Apple also listed several major banks that are already participating in the program including Capital One, Chase, Wells Fargo and Bank of America, with additional large banks listed as “coming soon”. On the retail side Apple has already lined up retailers such as Target, Disney, Macy’s, Staples, McDonalds, Subway, Whole Foods and Walgreens. You’ll be able to order a Happy Meal and pay for prescription medicine using the same easy payment system.
With the announcement of Apple Pay we finally have a large enough technological force that can change the way we pay for goods and services. Certainly competitors will follow which could lead to some industry fragmentation, but it appears like we’re finally going to get the chaos of the cash register under control.