Over the years I have written about the transition from using credit cards as we know them to using our smart phone as an e-wallet at the checkout counter.
So far in the U.S., this transition has been slow. For example, Google Wallet launched in 2011 with a Sprint Nexus S handset followed by a number of additional handsets, but the results have not resulted in a consumer shift to an e-wallet as of this date.
As Apple launches Apple Pay, we have to ask, “Will Apple be able to initiate the revolution where others have failed?” Apple has already sold 10 million new iPhones, so there are plenty of consumers with e-wallet capabilities. And Apple has shown that they can launch game-changing tools when you consider how they redefined what a smart phone is, what a tablet is, how we purchase and listen to music, and much more.
What is so different about Apple Pay that will launch mobile payments?
Let’s start with security. Apple’s built-in fingerprint reader was introduced on the iPhone 5S over a year ago and is now on both the iPhone 6, 6Plus, as well as the new iPads. Shoppers wishing to make a purchase will move their phone close to the payment kiosk so the near-field communications (NFC) chip can create a wireless connection to their phone, and they will then use their fingerprint to confirm the purchase. Apple states that this will make the purchase more secure than using a credit card. After all, giving a waiter (or anyone who processes your payment) your credit card where they can easily copy your credit card number and security code isn’t exactly the best security practice, but we all do it.
It is important to note that hackers have shown that it is possible to make a fake finger, and after some James Bond-like effort in getting a copy of your fingerprint they can get it to work on the fingerprint reader. However, this takes a lot of effort and it will be hard to do this to millions of smart phones at a time as hackers have shown they can do by stealing credit card numbers form large retailers recently. Additionally, when I put on my futurist hat and use predictable Hard Trends, it is easy to see that you will soon be using your face, voice, and other biometrics to make sure you are you, depending on the level of security needed. After all, our smart phones are already capable of capturing these additional biometrics. And, in the not to distant future, you will be using the blood vessel pattern under your finger to identify you, which is even better than a fingerprint.
The game-changing feature of Apple Pay is that the actual transaction does not transmit the credit card number or any of your personal information to the retailer during the transaction. Instead, Apple Pay creates a unique payment ID for each transaction, and the retailer only sees the approval and the amount of the purchase. This effectively sidesteps the problem of you loosing your credit card information if the retailer is hacked. As with other game-changing products and services Apple has launched in the past, this feature will be adopted and adapted by the competition and the e-wallet will finally take off in a big way.
Helping Apple Pay succeed is the fact that Apple has a large number of retailers, including Staples, McDonald’s, Macy’s, Disney, Walgreens, Whole Foods, and over 220,000 additional retail locations, who have the equipment in place to let you use your iPhone 6 or 6 Plus to make a purchase. No doubt that many more will be signing up every day as the e-wallet revolution spreads.
Finally, another flexible aspect to Apple Pay is that you can use a wide variety of credit cards, including Visa, American Express, MasterCard, Chase, Citi, Capital One, and Bank of America. You can also use your debit cards.
So will Apple Pay drive the big shift in consumer payments? Knowing that Google, as well as the cell phone companies, have already entered this field and are now joined by Apple with their system of increased privacy and security along with their large and rapidly growing iPhone 6 sales figures, I would say the big shift is now under way.
In the near future we will still have and use credit cards just as we still carry and use cash, but due to the large number of credit card numbers that have been stolen from a growing list of major retailers, most of us will prefer to use our smart phones when we make a purchase.
What are your thoughts about Apple Pay? Please share your thoughts so we can all learn together.
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