There’s been a huge amount of hype online about Apple’s newly announced mobile payment system “Apple Pay”. So, why the hype, how does it work, and just how revolutionary is it?  Lets dig into it and find out.

Screen Shot 2014-10-22 at 9.10.19 pmHow it works

The concept at a top-line seems simple.  You use your mobile phone to “tap and go” a payment at your local store, supermarket or service station.

We do it all the time.  With “Paypass” or “Paywave” enabled credit and debit cards, you get to the point of your transaction where the payment is required, and you show the cashier your card (indicating you’re going to “tap and go”).  They push a button on the register which sends the “sale amount” over to the credit card terminal.  Just a year or more back you’d then slide your card through, choose an account, enter a PIN and press OK.

More recently you probably found yourself inserting the card into the machine, but the real revolution came with the “tap and go”.  Now you simply move your card close to the payment terminal (normally within 5cm) and hey presto – payment is made.

Fast Forward to an Apple Pay enabled world and it’s a whole lot different – and, in my view, more secure.

Your iPhone 6 (or 6 Plus) is in your pocket.

Transaction complete, you tell the cashier you’re paying by card.  The card terminal is ready for payment.

Grab your phone, no need to unlock it, just point it closely to the terminal.  Immediately on-screen you are presented with your credit or debit cards – you tap the one you want to use, place your finger on the TouchID sensor and the payment goes through.

Screen Shot 2014-10-22 at 9.10.30 pm

To setup Apple Pay on your phone (available only in the US right now), you open up Passbook and add a new card, this simply allows you to point your camera at the card, rather than typing the card number, enter the expiry and CVV and then Apple authenticates the card with your bank.

Screen Shot 2014-10-22 at 9.10.09 pmIt really couldn’t be more simple.

The Banks

The issue for Aussies at the moment is that Apple have only rolled out Apple Pay in the USA.  The reason for that is not the hardware, not the retail stores, but the Banks.  Apple has to do deals with the bank to create the authentication of cards into the system.

This authentication allows Apple to store a secure code and number on your phone, and never pass your credit card details onto the retailers.

I imagine Apple has had strong interest from Aussie banks, particularly the CommBank and Westpac who have been the most innovative of late.

Lets hope for an announcement early in 2015.  Importantly, Australia is ready – more ready than the USA – for tap-and-go payments.

A Big deal in the USA

Screen Shot 2014-10-22 at 9.10.36 pmThis brings me to the big deal.  In the USA, people don’t “tap and go” much. In fact, not many retailers even have the terminals.  For some reason, Americans are still wedded to their credit cards, and cheque books.  In Australia we’ve adopted tap-and-go payments at a faster rate per-capita than any other country in the world.

That explains why the media in the US are so excited about Apple Pay.  You see, with Apple behind it, retailers will flock to introduce tap-and-go terminals and that will change the way the US pays at retail stores.

Here in Australia when tap-and-go first hit our stores, we had some concerns, some scares, some worried people about the security of it all.  The truth is that carrying a tap-and-go enabled card is like carrying a $100 note, the difference being if someone steals your card the bank can and will refund the cash.

The addition of fingerprint security to the mix makes all the worries of security go away.

What about Australia

You can use Apple Pay today in Australia.  The problem is you must have a US issued Credit Card, and that would mean paying foreign exchange rates for every transaction.

However, the tests that have been done here by those with US cards have proven that the infrastructure at the retail level is in place, and doesn’t change with Apple Pay.  All that’s needed to make it happen is the relationship between the banks and Apple to authenticate our cards.

Once again, it seems simple, and we’re hopeful of an announcement early in 2015.

Is it revolutionary?

Certainly not.  Apple Pay shadows the mobile payment technology introduced by Google a few years ago (Google Wallet), and our own banks have made apps for NFC enabled Android phones in the last year which have enabled mobile payments on those devices.

The revolution is really the power and force of public attention that Apple brings to any new technology.

Once again Apple have taken a much more detailed look at the whole process, not just enabling it as a basic function of a phone.

I for one – cannot wait.