What Is Apple Pay?
The term Apple Pay refers to a mobile contact payment system and digital wallet service offered by Apple. 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 remotely over the internet. Apple launched the service in 2014. Apple Pay is billed as an alternative to credit and debit cards, including chip and PIN cards as well as traditional magnetic stripe cards. Most major credit and debit cards currently support Apple Pay.
- Apple Pay is a mobile payment system that was in use by close to 441 million people around the world as of September 2019.
- The system is supported by most major credit cards and payment networks.
- Apple Pay allows customers to tap and pay using NFC-enabled point-of-sale terminals, or via online check-out.
- Apple Pay also allows users to send and receive money from other users via messaging to an iOS-enabled device.
- Although consumers were initially slow to adopt Apple Pay, it is the most popular digital payment service in the U.S.
Understanding 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 MacBook.
Apple Pay works 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 (POS) 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 ensures purchases are made only by the authorized user. Face ID figures to become a more ubiquitous security feature throughout Apple products as well. Apple promises never to share card information across its cloud. While this means users have to manually enter their card information into each device, it adds to the security of the service.
Apple first launched its own credit card, aptly called the Apple Card, in the United States in August 2019.
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. This is especially true among young Americans, who are using digital wallets more frequently on their smartphones. In fact, the payment service earned as much as 48% of the mobile wallet market in the United States, according to an August 2022 report from PYMTS.com. That's a jump from the 30.9% reported in 2019.
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.