More ambitious than the iPhone 6, more risky than the smartwatch, Apple's entrance into the mobile payments business promises to change the face of retail forever — if its bet pays off.
With Apple Pay, the company's goal is nothing less than to make the humble wallet obsolete. How does this system work? Will it really save us time at the cashier, or is it just another technological distraction? Here's everything we know so far about Apple Pay and Apple's leap into a whole new category of business.
What is Apple Pay?
Apple Pay is what Apple's calling its solution for storing and using credit cards on the iPhone. With Apple Pay, customers will be able to go to their local McDonald's or Whole Foods and pay by just by holding their iPhone close to a sensor. It'll allow users to pay and leave the store within about 10 seconds, which'll also help retailers move customers through in a more timely (read: profitable) manner.
How do I pay with Apple Pay?
To make a payment, you'll first need to add a credit card (or several) to your iPhone. You can start by importing the same credit card you have on file with Apple, but you're not limited to that one.
When you're ready to check out at a store that supports Apple Pay (more on that shortly), you'll hold your phone close to a card reader and touch your finger to the iPhone's fingerprint sensor to approve the transaction. Your card will be charged automatically.
Apple Pay also makes it easier to make mobile purchases on the Web. You'll be able to pay for your Uber, buy baseball tickets with MLB.com and order food from Seamless with one click.
How are the cards stored? Is this thing safe?
The credit card information is stored directly on the iPhone itself in a special chip that Apple's calling the Secure Element. Your account numbers are never sent to any Apple servers, the company claims, and not even the retailer can see it. Instead, the iPhone generates a proxy account number that it provides to the retailer. Then, for an extra layer of security, each and every transaction is protected by a uniquely generated code.
Requiring fingerprint authentication helps prevent thieves from paying with your iPhone in the event it gets lost — they're not likely to have your fingerprints on hand. This seemingly simple solution is made possible by Apple's highly integrated approach to designing software and hardware as a single package. Previous attempts at doing mobile payments have been hamstrung by questions about security.
What if I really do lose my phone?
Apple says you can use iCloud's Find My iPhone feature to disable Apple Pay entirely — another example of Apple taking advantage of an existing service.
With the recent news about iCloud breaches, should I really trust Apple to keep my information safe?
There's always a risk. But Apple argues that its solution is a much better alternative to handing out your credit card number in the clear to retailers whose card readers can be hacked or to waiters who can copy down your credit card number. Because nobody is seeing your credit card information with Apple Pay, even if a Target-style hack affects the retailer, they won't have your account numbers on hand to give up.
Apple Pay will be useless if nobody in the real world takes it. Where can I use it?
Apple's launching Apple Pay with a number of prominent retailers. In addition to the aforementioned Web sites, McDonald's and Whole Foods, here's a partial list:
Babies R Us
Toys R Us
Apple is planning on signing up more retailers by the end of the year. Apple's struck agreements with all the major payment processors, such as Visa, Mastercard and American Express. If your credit-card issuer is included below, chances are your card will work when the service launches next month.
Bank of America
Navy Federal Credit Union
Apple estimates that 83 percent of all credit card purchases will be compatible with the service.
When is Apple Pay coming?
Apple Pay will be available next month as an update to iOS 8, which is itself coming on Sept. 17.
Is anything else about my credit cards changing?
Nope. Your rewards will stay the same. You still can (and probably will) carry your credit cards with you, if you choose. The only thing Apple is offering here is the ability to use your phone instead of swiping the plastic from your wallet.