Apple Tool May Aid Mobile
The When Apple unveiled its new iPhone tools Sept. 9, some experts were optimistic that the debut would rock the world of payments and possibly, end the tepid adoption that so far, has plagued mobile payments.
The new tool is Apple Pay, powered by near field communication. Apple said at its product introduction event that Apple Pay will allow for more secure transactions than are currently possible with plastic 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 in Cupertino, Calif., on the day Apple Day rolled out. “We’re totally reliant on the exposed numbers, and the outdated and vulnerable magnetic interface, which by the way, is five decades old, and the security codes which all of us know aren't so secure.”
Instead, Apple debuted a system that shares no card information with the merchant. Apple Pay is the form of payment, 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,” Apple SVP Eddy Cue 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 is set to 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, according to the company.
Big banks such as Bank of America and Citi, credit card issuers American Express, Visa, and Mastercard and also the $60 billion Navy Federal Credit Union in Vienna, Va.
At launch, Apple Pay will work at some 220,000 retail locations presently able to accept contactless payments including Bloomingdales, Whole Foods, Walgreens, Subway and McDonalds, according to Apple.
In a prepared statement, Navy Federal explained why the credit union was 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,” the credit union said.
The cooperative said “(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 of 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. But they also indicated that, just maybe, Apple's latest tool changes the game. Because of Apple's considerable marketplace clout, Teresa Epperson, managing director in financial services practice at global business advisory services 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 Inc., in Newton, Mass., which powers CUWallet and MCX, among others, said, “What Apple has done is disruptive. Do I think this changes everything? No. But Apple's entry will make a difference in mobile payments.”