Apple Pay Is Not About Technology, It's About Popularity

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With a flair for the dramatic, Apple loves to introduce new products each fall at their headquarters. Whether it was the late Steve Jobs, or its current head Tim Cook, their single-syllabled CEOs are sure to generate front page news with whatever products they announce. This year much of the buzz from Apple's event surrounded the announcement of Apple Pay.

What is Apple Pay

When Apple Pay goes live, it will be a way to use an iPhone (and later its Apple Watch) to wirelessly authorize in-store purchases to the user's credit cards. Apple pay is a system built into the new iPhone 6 and iPhone 6 Plus that allows credit card users to quickly upload their eligible cards into Apple's Passbook app just by taking a picture of it with the iPhone's built in camera. The phone then uses a system called NFC (Near Field Communications) to allow wireless communications between phones and compatible terminals.

At this time, participating credit card issuers include American Express, Bank of America, Capital One, Chase, Citi, and Wells Fargo, with others such as Barclaycard, USAA, and US Bank coming soon. Major retail chains have already signed on to accept payments with this system including:

  • Bloomingdales
  • Subway
  • Whole Foods
  • Babies R Us
  • Toys R Us
  • Macy's
  • Panera Bread
  • McDonald's
  • Staples
  • Walt Disney World
  • PetCo
  • Walgreens
  • Nike

Apple claims the total number of stores that will accept this payment will be over 220,000 through contactless payments and within participating apps.

Is This Technology New?

This all sounds very high tech at a time when most credit card purchases are still being made using magnetic strips, the same way we have for decades. Yet the fact is that NFC technology has been with us for some time, but it just hasn't caught on. For example, Nokia introduced its 6131 flip phone in 2006 that offered NFC technology and many credit cards are already equipped with chips that can enable contactless payments.

And its not like NFC payments were only being promoted by a few unknown startups. MasterCard has had its PayPass service, which is similar to American Express' ExpressPay and Visa payWave.  In 2011, the Google Wallet service was introduced which incorporated the Paypass to smartphones equipped with the Android operating system. Then there is the case of the rather unfortunately named Isis mobile payment system, a joint venture between AT&T Mobility, T-Mobile USA and Verizon Wireless. Wisely, the company has just rebranded itself as Softcard.

Despite the availability of this technology, consumers didn't seem know about it or maybe they just didn't care... until after Apple hyped it up. The difference with Apple Pay is that Apple has lent its amazing brand strength and market power to re-introduce NFC technology to the general public as if it were something new and exciting.

How might Apple Pay play out?

The tens of millions of Apple iPhone 6 users might take to Apple Pay the way they have adopted other innovations from Apple. Soon, it could be the "in" thing to do to wave your phone in front of a credit card terminal while shaking your head at the luddites still reaching for their wallets like it's 1989.

On the other hand, not everyone is convinced. Matt Krantz of the USA Today makes a decent argument that Apple Pay won't catch on due to the fees charged by Apple and other disincentives for merchants to adopt this system. He points out that Apple will receive a small, 0.15%  cut of every transaction, and that its estimate of 220,000 compatible retailers is an overstatement by its own admission.

As for me, I know that the day is coming when the credit card will become a virtual payment instrument, not a physical object that we tote around. I think Apple Pay will ultimately be seen as an important step along that journey, but count me as skeptical that it will dominate the payment landscape in the long run.

 *The above image can be found at

*Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by any card issuer.

*The content in this article is accurate at the publishing date, and may be subject to changes per the card issuer.

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