CUPERTINO, Calif. ? This week Apple announced Apple Pay, a new payment service that the company says will transform mobile payments with an easy, secure and private way to pay.
According to the company, Apple Pay works with iPhone 6 and iPhone 6 Plus through a groundbreaking NFC antenna design, a dedicated chip called the Secure Element, and the security and convenience of Touch ID. Hundreds of millions of users can set up Apple Pay on their devices through their credit or debit card already on file from their iTunes Store account. Apple Pay will also work with the newly announced Apple Watch, extending Apple Pay to over 200 million owners of the iPhone 5, iPhone 5c and iPhone 5s worldwide.
Apple Pay supports credit and debit cards from American Express, MasterCard and Visa, issued by banks including Bank of America, Capital One Bank, Chase, Citi and Wells Fargo, representing 83% of credit card purchase volume in the United States, according to Apple.
In addition to the 258 Apple retail stores in the U.S., retailers that will support Apple Pay include Bloomingdale’s, Disney Store and Walt Disney World Resort, Duane Reade, Macy’s, McDonald’s, Sephora, Staples, Subway, Walgreens and Whole Foods Market. Apple Watch will also work at the more than 220,000 U.S. merchant locations that have contactless payment enabled. Apple Pay is also able to make purchases through apps in the App Store.
Eddy Cue, Apple’s senior vice president of Internet software and services, says that security and privacy are at the core of Apple Pay.
“When you’re using Apple Pay in a store, restaurant or other merchant, cashiers will no longer see your name, credit card number or security code, helping to reduce the potential for fraud,” he said. “Apple doesn’t collect your purchase history, so we don’t know what you bought, where you bought it or how much you paid for it. And if your iPhone is lost or stolen, you can use Find My iPhone to quickly suspend payments from that device.”
When a user adds a credit or debit card with Apple Pay, the actual card numbers are not stored on the device or on Apple servers. Instead, a unique Device Account Number is assigned, encrypted and securely stored in the Secure Element on the user’s iPhone or Apple Watch. Each transaction is authorized with a one-time unique number using the Device Account Number and instead of using the security code from the back of the user’s card, Apple Pay creates a dynamic security code to securely validate each transaction.
Starting in October, with iPhone 6 and iPhone 6 Plus, Apple Pay will be available in the U.S. as a free update to iOS 8. Apple Pay will work in stores with iPhone 6, iPhone 6 Plus and Apple Watch. Apple Pay APIs will be available to developers in iOS 8 so they can enable purchasing physical goods within their apps on iPhone 6 and iPhone 6 Plus.