|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
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
November 6, 2014