If Apple Pay's touch-and-pay system is reliable and continues to get adoption momentum, it can be a major game-changer in the U.S. economy.
Apple Pay, probably the most important new Apple product or service to come out since the institution of the iPad in 2010, goes into general availability on Oct. 20. More than 500 banks have signed on to accept payments using it, CEO Tim Cook said Oct. 16 during the company's iPad 2 launch event.
Apple Pay, introduced Sept. 9 at the company's iPhone 6 and Apple Watch launch event, was originally going to go live early next year, after the holiday buying season. So the fact that it is ready to go now is a significant data point for the company and its budding financial ecosystem.
If Apple Pay is easy and reliable to use and gets widespread adoption, it stands to be a major game-changer in the U.S. economy. Devices come and go, but a payment method that curtails security problems inherent in magnetic-stripe credit cards could be around for a long, long time.
Adoption appears to be gathering momentum; Apple has been persuasive with both financial institutions and retailers. It remains to be seen, however, if smaller retailers will want to invest the approximately $1,000 it will take to buy the near-field communication (NFC) hardware and hook up to the Apple network.
One-Touch, Biometric Identification
Apple Pay uses one-touch (with either iPhone or Apple Watch) checkout, with fingerprint second identification; it requires no card number entry; it has no need to type addresses; and no card information is shared with the merchant or with Apple. It creates one-time payment numbers for purchases, rather than transmitting credit card numbers and security codes; thus, everything stays between the bank and the buyer.
There is no plastic card to lose or have stolen; no crooked cashier can copy your card and try to use it; there is no personal information going over the Internet, and so on.
For another perspective, see Wayne Rash's article.
"We think it is going to be profound. It's going to change the way we pay for things," Cook said at the Oct. 16 event. "Everything you need is built into iPhone 6. It's easy, it's secure and, yes, it's a private way to pay for things."
Most Major Financials Are On-Board
Credit cards and banks supporting the system include Visa, MasterCard and American Express, Citi, Bank of America and PNC. Retailers ready to go include Macy's, Bloomingdale's, Walgreen's, Duane Reade, Whole Foods, Disney Stores and Staples. Restaurants supporting Apple Pay include Subway and Panera Bread.
We'll be hearing a lot more about Apple Pay as time goes on. It won't be the death knell for credit cards, but it will change the way a lot of people buy things. All the major U.S. banks have already bought into it, and leading retailers such as Disney, McDonald's, Whole Foods, Subway and a list of others are already making accommodations for it.
This will provide stiff competition, too, for current NFC payment vendors such as Google Wallet and PayPal, which haven't been able to get the traction they need in the market.