Apple on Tuesday unveiled new iPhone tools that will rock the world of payments and possibly, multiple sources told CU Times, end the tepid adoption that so far has plagued mobile payment uptake.

The new tool is Apple Pay, powered by near field communication. Apple said at its product introduction event that Apple Pay will allow for much more secure transactions than are currently possible with plastic credit cards.

“This whole process is based on this little piece of plastic, whether it's a credit or debit card,” Apple CEO Tim Cook said on stage. “We're totally reliant on the exposed numbers, and the outdated and vulnerable magnetic interface, which by the way is five decades old, and the security codes which all of us know aren't so secure.”

Apple instead is debuting a system that shares no card information as such with the merchant. The consumer using Apple Pay pays with it, using a credit or debit card stored in it.

“Apple doesn't know what you bought, where you bought it or how much you paid for it,” Eddy Cue, an Apple senior vice president said. “The transaction is between you, the merchant and your bank. The cashier doesn't see your name, credit card number or security code.”

Apple Pay will launch in October and, apparently, will run only on the new iPhone 6 and the larger iPhone 6 Plus (earlier iPhones lack NFC, which is integral to Apple's transaction processing). Big banks such as Bank of America and Citi, credit card issuers American Express, Visa and Mastercard are on board … and, also the Vienna, Va.-based Navy Federal Credit Union.

Apple Pay, at launch, will work at some 220,000 retail locations presently able to accept contactless payments. That includes Bloomingdales, Whole Foods, Walgreens, Subway and McDonalds.

In a prepared statement, a Navy Federal spokesperson explained why the $60 billion institution determined to get involved in Apple Pay.

“Navy Federal Credit Union is proud to be one of the first financial institutions to provide Apple Pay later this fall. With it, we'll be able to deliver on the promise of easy and secure mobile payments, and add a layer of convenience and security to using Navy Federal credit and debit cards. By combining Apple's history of innovation with Navy Federal's unique military membership, Apple Pay has the ability to make mobile payments more accessible for military families who rely on mobile technology in their daily lives.”

Randy Hopper, Navy Federal vice president, credit cards and business optimization, added:

“Our members live fast-paced and mobile lives. And, they have enthusiastically adopted our mobile banking solutions. Now, with Apple Pay, they'll be able to save time when shopping while having a safe and easy experience.”

Acknowledgement among payments experts that, so far, mobile payments have not been widely adopted is broad. However, they also indicated that just maybe, Apple's entry changes the game.

Because of Apple's considerable marketplace clout, Teresa Epperson, managing director in the Financial Services Practice at consulting firm AlixPartners, said, “This could get everybody to sit up and take notice.”

Epperson elaborated that, per her firm's research, there already is a groundswell of would-be mobile payments users, especially in the under-35 demographic. The barrier has been anemic adoption of mobile payments technology at retail but now that may change.

Chris Gardner, a founder of mobile payments innovator Paydiant (which powers CUWallet, and MCX, among others), said “This is the last of the big shoes to drop. What Apple has done is disruptive.”

“Do I think this changes everything? No,” he said. “But Apple's entry will make a difference in mobile payments.”

At CU Wallet, the credit union-owned mobile payments initiative, founder Paul Fiore said, “I see this as all good news. This will be the impetus to involve merchants. If Apple makes the ability to do mobile payments happen faster, it helps CU Wallet.”

As for consumer readiness to use a mobile wallet – about which some have raised doubts – the latest AlixPartners study indicated that many already are using it. According to that study, 63% of18- to 25-year-olds and 56% of 26- to 35-year-olds report making a recent mobile money-related transaction.

AlixPartners also found that 40% of smartphone/tablet owners between 35 and 44, and 27% of 45 to 54 year-olds, reported conducting a mobile money-related transaction in the previous month.

For the purposes of its research, AlixPartners, Epperson said, defined mobile payment broadly. It includes using mobile apps such as HotelTonight, buying a coffee with the Starbucks app, doing P2P with PayPal's mobile app and much more. The common thread, Epperson said, is that all such transactions involve money movement and, she stressed, already a lot of money is moving because of mobile phone transactions.

Her point: Just maybe the time is right for mobile payments and, what is beyond question, is that entry of Apple into the mix changes the landscape and gives the true wallet believers ample reason to be optimistic.

Instant Insights /

Apple Pay Set to Rock Mobile Payments: Mobility Matters

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