Apple Pay: It’s Good For You

October 29, 2014

Last week Apple launched Apple Pay, a one-touch payment system using the iPhone 6 and 6 Plus, that uses your existing credit cards at cash registers at hundreds of thousands of brick-and-mortar stores around the United States. Within the first week, Apple announced over 1 million credit cards had been activated with Apple Pay, making it already the number one “contactless payment system” in the world.

I’ve used it and think it’s nothing short of revolutionary. Apple also claims it is the safest, most secure system available to consumers, which makes it even more impressive. More on that further down.

I’ve been using Apple Pay since the launch; the process works like magic. It’s so fast, that a couple of times, when I used it in a store, both the checkout clerk and I were surprised at how quick things went. After I’d registered my credit card (which in itself was easy) and I got to the checkout counter, it went like this:

  1. I pulled out my phone and waved it by the payment box (often a PIN pad).
  2. The phone woke up on its own, then showed me my credit card and indicated I should use my fingerprint reader.
  3. I “thumbed” my phone and a tone went off.
  4. Since I use a debit card, the checkout asked for my pin. I punched it in.
  5. Payment complete, receipt started printing.

Had I used a regular credit card, it would have skipped the fourth step and been even faster.

I’ve since used Apple Pay at Walgreen’s, Whole Foods, a taxi I hailed on the street, and most awesome: a CTA Ventra turnstile (it charged me full fare, not the reduced Ventra card fare). Every stop brought the same experience.

If you’ve ever tried Google Wallet, Square, PayPal or any other phone-based payment system, you know there are often more awkward steps and is it sometimes slower than just using a regular old credit card. And unlike those other systems, Apple Pay doesn’t cost the consumer anything more: Apple gets paid a fraction of what banks pay credit card companies for the transaction. This means credit card companies don’t lose out, and like the system more than they’d like Google Wallet, Square or PayPal.

Apple really has nailed the user experience of the payment system. It is fast, requires one touch and very little thought. Much like Amazon’s “one-click” purchase if you have Amazon Prime, it’s addicting and could potentially lead to many more purchases, I imagine.

But it’s the under the hood stuff, the security aspects, that makes Apple Pay really worth your time and the best defense against getting your credit cards hijacked by mass hack-attacks like the ones that hit Target, Kmart, Albertson’s grocery and others. It’s all because Apple uses “tokenization” and a special secure chip, meaning neither your credit card number or any other personal information is revealed during your transaction. And because the Apple Pay transaction is so secure from hackers, reducing fraud risk, banks love it so much that some are paying their customers to try Apple Pay.

There are some good explanations of how tokenization works, but essentially it reduces your payment request to the bank into a one-time mathematical code that means gibberish to hackers that may try to reverse engineer it. And because Apple’s iPhone 6 and 6 Plus manage the transactions on a secure chip, insulated from every other part of the phone, no hacker could break into your phone to get transaction information. In fact, once you register your card, the only people who know what transactions you’ve completed are you and your bank.

This payment Nirvana, where only a few people get to know what you’re up to, is not part of many big retailers’ plans. That’s why a group called CurrentC, made up of companies like RiteAid and CVS, has been opposing Apple Pay. They want to use their system, due to be launched sometime next year, to manage your electronic payments. And yes, their system will be much less secure and it will provide participating retailers with a lot of information about you. Not an appealing option.

If you have a iPhone 6 or 6 Plus, Apple Pay is very useful. And if you’re considering a new phone, I’d say Apple Pay should tip the balance in favor of the iPhone.