The digital wallet has been one of the longest standing ideas in the technological world. The complexity of banking and money security means that the feelings of ‘the old ways are the best’ have prevailed.
This is a bit different for those of us in the UK and Europe. For instance, we’ve had widespread use of Chip & Pin payments in stores for over a decade and contactless payment via NFC built in to our cards for the last 2 years at least.
To the best of my knowledge, this is some what different to the US, where card payments are still processed with a signature. So I can see that there can easily be some confusion around how an in-store digital payment platform operates.
The simplest explanation I have so for for Apple Pay is the following:
- Start with the credit or debit card registered to your Apple ID (This card’s details are not stored on your device)
- You go to make a purchase and the terminal broadcasts a signal and goes in to receive mode
- This receive mode is awaiting a ‘key’
- Your NFC enabled card has this ‘key’
- Where Apple Pay steps in is with a ‘key’ but this is not the key from your card. It’s a ‘key’ generated instantly in the same way 2-stage verification codes are generated
- This new ‘generated key’ is released to the terminal up on the Touch ID approving the action (In the same way it does for sign-ins)
- This ‘generated key’ is then received by the terminal and checked against the algorithm associated with payments (Again like 2-stage authentication) and approves the purchase
- At this point, this ‘key’ is destroyed and a new one generated and sent to your device
All of that happens in the time it takes to read £19.99 on your screen and to tap your thumb on the home button.
So that means Apple Pay is effectively the safest form of payment currently available. Someone steals your device, you can remotely wipe it and no one can use your details. You can do that quicker than a credit card company and you can also track the phone. You can’t do that with your wallet!
As Apply Pay arrives in the UK today, it’s restricted to the same £20 limit as all contactless payments. That will increase to £30 later this year and in the future, the banks will add support for payments over this amount.
The less publicised version of Apple Pay is the online version. Payments on cards will be able to be taken from websites, but using your iPhone as the payment terminal.
Apple Pay is a fledgling payments format, as all new payments systems are. There’s a chance that this will not see popular adoption, but given that the UK took to chip and pin faster than the rest of the world, I truly think that we will lead the way with Apple Pay.
For more information, The Guardian have a good write up and you can see some screen shots of the setup process below: