Orion Nebula

Virtual Wallets
Wikipedia's article on this topic

Another article on Apple Pay

Wikipedia's article on how NFC works

Business Insider's article on the nuts & bolts of the Apple-VISA connection, written in laymen's terms

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In an article about Apple Pay and the mobile payment revolution in Time Magazine (The Apple Pay Effect, Time, November 3, 2014), author Victor Luckerson begins with a discussion of what's required to use smartphones and other mobile devices to pay for goods and services, instead of using a credit card. He summarizes the reasons that shoppers “have been wary of trusting their banking information to the omnipresent cloud in an era of endless data breaches.” Apple Pay is only the latest entry and finds itself in line behind Google Wallet, Paypal, Walmart's CurrentC, and Verizon's Softcard. Though security is the first concern, each of the above also works only in certain stores and/or with credit card accounts from particular banks. It's no wonder that in 2014 Americans are expected to use credit cards about a million times more than any virtual wallet setup.

These systems all expect the shopper to pay by waving his smartphone near the store's receiver device-- the one that lets him also swipe his credit card. They rely on yet another form of wireless technology called near-field communication, or NFC, which uses a magnetic field rather than any kind of radio waves, and is very much short-range so as to make it more difficult for would-be eavesdroppers. A similar setup is already in use in some credit cards that only need to be waved near the receiver instead of “swiped” through it.

With providers like Paypal and Google, this is the general procedure: For the first purchase, the user registers and inputs his phone number. Next, the provider sends him a short text message with a PIN. The user then enters the received PIN, inputs his credit card info and validates payment, thus completing the deal and setting himself up for future mobile payment purchases. For subsequent buys, the user just waves the smartphone, enters his PIN to authenticate, and then validates the payment. Some payment security experts have stated that mobile technology could be a safer option than physical credit cards.

The Apple Pay user waves his new iPhone 6 or 6 Plus near the receiver, and then a does a light press on the phone's fingerprint scanner to verify his identity. Apple says their system is safer because in case the iPhone is stolen, this Touch ID technology makes the system very sure whether or not thievery is afoot. Any credit cards you may want to pay with are added to the Apple Pay system by taking a picture of them with the phone. They become added to the phone's Passbook, which is kept in the “cloud” someplace-- that would be a server (a computer) owned, operated and secured by Apple, and NOT on the iPhone itself. Actual credit card numbers are not used or transmitted at point-of-sale. Instead, a single-use number, which is associated with the credit card, is generated for each transaction and sent from phone to merchant to bank along with the particulars of the sale. Any thieves, near-field or far away can only learn what was purchased and how much was paid.

Is this a good way to pay for goods and services? Instead of reaching for his wallet, pulling his credit card and swiping and validating it, the user reaches for his smartphone and waves and validates. It could be quicker with the phone, but don't forget that none of these systems are currently ubiquitous, though this is definitely the wave of the future.
November 6, 2014

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