Sunday, October 19, 2014

Apple Pay Hitting The Streets Tomorrow, What iPhone Users Need to Know

For iPhone 6 and 6 Plus users Apple Pay officially launches on Monday in the U.S., giving Apple users access to a new (for Apple) technology that will make easier to make in-store and online payments possible.

The new service, which Apple previously unveiled and further detailed this past week will be available in over 220,000 stores at some 35 retail locations. Stores include Whole Foods, Macy's, McDonald's, Duane Reed, Texaco and others. In addition to those stores, Apple listed 23 store brands accepting online payments with Apple Pay, including Staples and Starbucks, which today relies upon QR reader technology, not NFC, for in-store payments to buy coffee.

How Do I Use Apple Pay With My iPhone 6?

Apple Pay uses a tiny Near Field Communication chip (NFC) that is embedded inside the phone. These chips have limited localized range that allows the device to wirelessly communicate directly with NFC readers. In order to utilize Apple Pay you'll first need to follow these steps to setup a payment option and get things running:

Setting up Apple Pay on your iPhone
  1. Download iOS 8.1
  2. Open the Passbook app
  3. Tap on Set up Apple Pay
  4. Add cards:
    1. You can select cards already associated Passbook or iTunes gift card simply by confirming you security code
    2. You can scan new cards with iPhone’s camera or manually input them
  5. The first card you add automatically becomes your default payment card, but you can go to Passbook anytime to pay with a different card or select a new default in Settings.
Once you’ve added a credit card, you’ll be able to view your transactions, enable notifications for it, and have quick access to the bank’s app and phone number in case you have any problems. You can add up to eight different cards to the system.

Now that you have your payment information added, in order to complete purchases you simply need to hold your device in close proximity, less than a few inches, to an active NFC reader while holding the Touch ID. Apple explains that "A subtle vibration and beep let you know" when a purchase is done, there will be no need to look at the screen or enter any further information.

How Secure Will Apple Play Be?

Apple is billing Apple Pay as an ultra-secure method of paying for items in store. According to Apple your credit card information and paying credentials are never stored on your iPhone or iCloud account. Secondly, retailers never receive your card details, so your account will should stay safe, even if the store suffers from a massive security breach like the ones that have impacted Target and the Home Depot recently.

The NFC payment system utilizes tokenization. Essentially, the system works with card providers like Visa or your bank to replace your sensitive data with random data that has the same structure and formatting. So your 16-digit credit card number gets stored in the bank or card provider’s extremely secure database, and then another 16-digit number that looks and acts like a credit card number is generated to verify the purchase.

In effect mobile payments handled through NFC payment systems via either Google Wallet, Apple Pay or Softcard should be more secure than handing over your credit or debit card and entering your PIN. However, the system isn't without its downfalls and there are still inherent risks (more on that later). Banks though have stated that they will be offering the same fraud protections that any other credit card user would be afforded.

Additionally, if your iPhone or iPad is ever lost or stolen, you can use Find My iPhone to quickly put your device in Lost Mode to suspend Apple Pay, or you can wipe your device completely clean removing any chance that a user can access Passbook.

Which Credit Cards and Banks Will Be Accepted?

Apple currently supports the credit and debit cards from the three major card companies -- American Express, Visa and MasterCard. In addition, more than 500 banks are backing Apple Pay, though Apple named just a few: Chase, Capital One, Bank of America, Citi, Wells Fargo, US Bank, Barclaycard, PNC, USAA, Navy Federal Credit Union and American Express. Those banks represent 83% of all credit card purchasing in the U.S.

Where Will I Be Able to Use Apple Pay?

There are currently more than 220,000 stores that have signed on to utilize NFC terminals and Apple has stated they have partnerships with all those companies currently employing the technology. On its website, the company lists its own store, Bloomingdales, Macy’s, Duane Reade, McDonald’s, Sephora, Petco, Panera Bread, Staples, Nike, Walgreens, Subway, Whole Foods, and more as participating current stores.

As Google Wallet users know, this however does not mean that all of those stores actually have working terminals. In fact, one of the major reasons we haven't seen widespread success of the current contactless payment systems is largely due to a lack of widespread availability. With Apple coming on-board and making a major push for the system we should see more businesses getting on-board. However, at this time at some location you may still have issues finding a working terminal. Also keep in mind the 220,000 stores represent just 5% of all available stores.

Conclusion, My Thoughts and Concerns!

As a long time Android user, Apple Pay is nothing new to me. We've had service like Google Wallet for some time now and contactless payment systems aren't anything new. I've owned a PayPass enabled MasterCard prior to that. So while it is great to see Apple finally adding on the option, until we see more widespread adoption and much, much greater security it is just a novelty for me. As I mentioned above these new payment systems aren't without their own security concerns.

While Apple insists that none of your payment information will be stored on either the device or the iCloud servers making that data slightly more secure. Accessing the information via a stolen iPhone may not be all that difficult. Touch ID has previously been hacked, and with some ease I might add. We've even seen the iPhone 6 fingerprint sensor already hacked. While this latest report indicates it might be more difficult to achieve, that doesn't rule out the possibility of further attempts proving otherwise.

With users storing more and more information on portable devices, they become much higher valued targets. Admittedly it is easy enough to remotely wipe a device, however this involves being able to actually access your Apple account. Which may serve as enough delay to allow thieves time to access your payment system to do some shopping or retrieve anything else they may need on your device. Given my own concerns I'll pass on adding mobile payments to my device for now at least.

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