As hundreds of fans pocket new iPhone 6 models Friday, consumers will be peering at their mobile screens and discovering a new function: Apple Pay.
Forget clumsily handing over cash or even signing a credit or debit card slip. With major companies including Citi and McDonald’s attached to the new Apple Pay platform, many industries will be watching to see if Apple mobile consumers will embrace the new e-wallet technology, which enables swift purchases with the swipe of an iPhone or Apple Watch.
Apple Pay joins a growing field of mobile wallet payment options including Square, the mobile payment platform founded by Jack Dorsey, who also helped create Twitter. Collectively these newer companies want to replace old-fashioned bulky cash registers, and take a bite out of the lucrative electronic payment industry.
Apple Pay and competitors also offer smaller merchants an opportunity to boost revenue through easier purchase platforms. Smaller businesses, generally, can more quickly adopt technology changes including the growth of e-wallet models.
Customers who already have credit and debit cards on file with Apple through iTunes music purchases can access Apple Pay which comes installed on the latest iPhone models, the 6 and 6 Plus.
How Apple Pay works
Here’s how Apple Pay works.
The platform includes near-field communication technology or NFC, which allows for the transfer of small amounts of data between two devices held closely to one another. So by tapping your smartphone on a payment terminal, a retail store or coffee shop, for example, will be able to identify your account and allow you to pay quickly. The idea is plastic credit cards and even paper documents like train tickets will become less frequently used. Just swipe your smartphone or smartwatch and go.
NFC-enabled payments are not widespread in the U.S. But the technology is forecast to grow, according to analysts, as mobile payment alternatives continue to expand.
Of course any new payment technology raises questions about the security of data. Industry experts will be watching as customers road-test Apple Pay.
Big businesses, meanwhile, see new mobile payment platforms only expanding and have signed on with Apple Pay’s technology.
American Express, MasterCard and Visa, along with major banks including Bank of America, Capital One, Chase, Wells Fargo and Citi have signed on to use Apple Pay. Big retailers that have agreed to use the platform include Macy’s, McDonald’s and Walgreen’s.
But what about smaller merchants?
Jim McCarthy, Visa’s global head of innovation, said there won’t be too much of a difference between how small and large companies implement Apple Pay. And it will be up to merchants to upgrade sales systems to include NFC technology that can connect to platforms including Apple Pay.
The tech giant’s platform is targeted at consumers, giving them ease and convenience when making purchases. So businesses that invest and adopt the technology will be able to cater to more mobile savvy consumers. With iOS8, Apple’s mobile operating system, “folks can turn any phone into a card acceptance device, so merchants should create or update their apps to make e-commerce easier for shoppers, by making the iPhone the way to pay,” McCarthy said.
Apple Pay adoption will likely be gradual among small companies considering upgrading to new NFC-enabled terminals, said Russ Mahy, executive director of technology at Chase.
“What is compelling is that consumers will have an iPhone with 12 credit cards they can select with just a thumb print to pay right there,” Mahy said. “That is a real and obvious driver for merchants to adopt—with tens of millions of iPhones, you don’t want them to be turned away. We think that will be a triggering event,” Mahy said.