What is Apple Pay (AAPL, GOOG)

Apple Pay is a mobile contact payment system and digital wallet service that Apple Inc. introduced in 2014. The service allows users to pay for products and services using near field communication (NFC) at the point of sale, whether in person, via iOS apps or the Internet. Apple Pay is an alternative to credit and debt cards, including chip and PIN cards as well as the more traditional magnetic stripe cards. Most major credit and debit cards support Apple Pay.


Apple Pay requires users to upload their payment information to Apple Wallet and follow the steps through verification with the card issuer. Once uploaded, all information required for payment is linked to the app, so the user does not need to physically handle a card upon payment. Devices that support Apple Pay include the iPhone 6 and later models, Apple Watch, iPad and the Mac. 

Notably, Apple Pay will work with any contactless payment system, not just Apple-specific terminals. The near-field communication antenna embedded within them allows Apple devices to wirelessly communicate with the chosen point of sale system. 

In addition to its ease of use, one of Apple Pay’s main positives is the increased level of security it provides. Apple Pay essentially creates a token within its infrastructure that replaces credit card information. In its place, the system creates what is known as a Device Account Number that is encrypted and stored in the device’s Secure Element. Upon payment, it is the token that the merchants use to process the transaction, meaning they never have direct access to the card details.

Fingertip recognition software included within Apple’s Touch ID is another verification feature that insures purchases are made made by the authorized user. Face ID figures to become a more ubiquitous security feature throughout Apple products as well.

Growth of Apple Pay

Consumer adoption of Apple Pay has been somewhat slow, but its popularity appears to be growing, along with other forms of mobile payment in the U.S. To this point, mobile payment use is much more advanced in Asia, for example.

Recognition that the physical act of making purchases using Apple Pay is straightforward and secure should continue to help change consumer behaviors. All the user has to do is select a card on the app and hold their iPhone over the contactless payment reader while keeping their finger on the Touch ID to complete the transaction.