After weeks of rumour, hype and speculation, Apple has made its long-awaited entry into the payments business with a compelling mix of NFC technology, tokenisation, biometrics and must-have mobile form factors, including the new iPhone 6 and forthcoming Apple Watch.
At a star-studded event in Cupertino, California, Apple chief Tim Cook pulled the veil on the company's Apple Pay suite, deriding traditional payments as "broken" and reliant for security on oudated magentic stripes and vulnerable passwords.
In its place, Apple Pay comes complete with an NFC antenna and a dedicated chip - the Secure Element - for storing encrypted and unique 'Device Account Numbers'. "These numbers are never stored on Apple servers," says the tech giant. "And when you make a purchase, the Device Account Number alongside a transaction-specific dynamic security code is used to process your payment. So your actual credit or debit card numbers are never shared with merchants or transmitted with payment."
Credit and debit cards can be easily added to the app using accounts already stored on iTunes, plus the three-digit security code. Alternatively, users can input a new card by taking a snap of it using the phone's onboard camera.
To pay by phone, users simply hold their finger over the Touch ID biometric fingerprint application and tap the device against the retailer's terminal. For the Apple Watch, a double-click payments button and a flip of the wrist near the contactless reader is all that's required. Users must enter a code each time they strap the watch on in order to activate the payments functionality.
Apple has pulled together a formidable array of support for its excursion into the payments industry, with all three major card schemes onboard and top US banks, including Chase, Citi, Bank of America, Capital One and Wells Fargo. Billed as 'coming soon' are Barclays, Navy Federal Credit Union, USAA, PNC and USBank.
"When we review mobile wallet providers, we look for payment safety, quality of service and ease of use for our customers. Apple Pay is a strong offering in those areas and we know our customers want and need this option as they live their increasingly digital lives," says Jim Smith, head of virtual channels for Wells Fargo. "It is our priority to offer innovative technologies to meet our customers where they are - and for many, that's on a mobile device. After all, a wallet may no longer be in your back pocket or purse - it's in the palm of your hand alongside your GPS-enabled maps, camera, music, email, and social networks."
Terms of the arrangement between Apple and the banks have not been made public, but it is understood that Apple is using the improvements in security wrought by biometrics as leverage to get a rebate on card swipe fees.
Apple Pay will be made available for US consumers via a free update to iOS 8 this October.