Apple puts payments at our fingertips, but at what cost?
20 October 2014 18:01 GMT

Apple Pay uses the NFC technology that is already well used through the US.

Although the launch of Apple Pay in the US today has been hailed in some quarters as a potentially revolutionary step for retail and payments, critics have raised doubts over the system’s longevity and impact.

Apple’s Touch ID sensor means that consumers simply need to press their fingers to an iPhone 6 or iPhone 6 Plus to validate payments – no more fumbling around with credit cards. The innovation brings the California-based tech firm firmly into the swelling mobile payments market, which is predicted to quadruple to $90 billion by 2017.

Perhaps crucially for retailers, Apple Pay uses NFC technology, which is already used to an extent within the US market – there is no need to buy additional hardware. It has also worked closely with top banks and card issuers, such as Mastercard, Visa and Bank of America, meaning that public acceptance will be easier.

It is easy to get going: Users simply need to enter the security code of any card linked to iTunes in the Passbook app, or they can use the iSight camera to quickly input card information.

Once completed, this gives them access to a service supported by more than 220,000 retailers and 500 banks in the US.

There a number of security functions. Card details aren’t stored on the phone or in iCloud – once these are in Passbook, the numbers are assigned a unique device account number, encrypted and stored in the phone's Secure Element Chip.

Apple Pay has already expanded before its launch, with the addition of Touch ID to new iPads, raising the prospect of easier online shopping.

“The reaction to Apple Pay has been amazing. We continue to add more Apple Pay ready banks, credit card companies and merchants, and think our users will love paying with Apple Pay,” said Eddy Cue, Apple’s senior vice president of Internet Software and Services.

When the novelty element of paying with your fingerprint fades, there will be a number of ways in which retailers can use the system to add value such as through hyperlocal and targeted offers, and virtual coupons.

However, critics have been keen to point out some pitfalls to the system.

Firstly, there is the fact that paying with a credit card is currently quite quick – will people change their habits just for a few seconds difference?

Secondly, the 220,000 figure for retailers represents just 5.5 percent of all outlets in US, suggesting it is unlikely that wallets can be ditched just yet. Importantly, there is also no support for store cards available.

Thirdly, there is the issue of spoofing. A security expert quickly hacked the iPhone 6's TouchID sensor after its launched in September using just lifted fingerprints, glue and paper. With Apple Pay, thieves have more incentive to abuse access to an iPhone. 

Apple Pay will be available in the US starting Monday, October 20 with iOS 8.1. For shopping in stores, Apple Pay will work with iPhone 6, iPhone 6 Plus and with Apple Watch upon availability.

At this stage, it remains to be seen if Apple Pay will succeed where other NFC-based and biometrics-backed services have failed to take off. Certainly having the weight of Apple and major banks behind it gives it a greater chance than most.

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