Apple's Payment System May Be A Link Between Existing Services

Apple could push contactless payments
to the next level by leveraging its new
devices and TouchID technology.
Since the discovery of an NFC chip on one of the leaked circuit boards allegedly destined for the iPhone 6 there has been much talk about how Apple is planning to launch its own payments system and how this might work.

However leaks suggesting that Apple has reached agreements with Visa and Mastercard might indicate that this new payments tool might be more akin to Google's Wallet than any fundamental shift in how we pay for things.

Firstly the technology. Visa and Mastercard have been rolling out contactless payments using RFID for several years now. NFC is a subset of RFID which is technically capable of supporting the connections required. This is how Google's Wallet works for payments. You load money onto a virtual credit card in Google Wallet and your phone acts like a contactless card for payments.

It seems logical to me that Apple would use the same setup for payments through its new iPhone. The real difference will be how those funds are added to your virtual credit card. Apple has access to your payment information through the iTunes stores. In theory it's payment service can link that information to the NFC chip on the iPhone and allow your phone to become a gateway to your credit card. Without having to pre-plan the loading of funds to your virtual credit card the whole process becomes much more convenient.

Also, because TouchID can be considered a security factor that is at least as secure as a PIN (and way more secure than signature verification, which is still in widespread use in the States) it will be possible to do away with the barriers that restrict the utility of contactless payments, to wit: upper limits on contactless payments and PIN verification for every nth transaction. For larger transactions Apple could potentially require the presence of both a TouchID authentication and Apple's new wearable to complete a purchase.

The use of the existing PayWave and PayPass services would mean that Apple would be able to go global with its new payment service in very short order.

It would also mean that Apple creates an instant massive demand for both it's new iPhone and smartwatch - sufficient to drive massive increases in sales.


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