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The Green Sheet Online Edition

November 10, 2014 • Issue 14:11:01

All you need to know about Apple Pay

By John Kiernan

Editor's Note: Editor's Note: This article was published by CardHub at www.cardhub.com/edu/apple-pay on Oct. 19, 2014. Copyright © 2014 by CardHub; all rights reserved. Reprinted with permission.

The latest innovation out of Cupertino, Calif., is here: Apple Pay. Apple Pay is the technology giant's entrant into the emerging world of virtual wallets and is now available on the iPhone 6, iPhone 6 Plus, iPad Air 2, iPad mini 3 as well as the forthcoming Apple Watch. With it, users can enter their credit card information into their devices or iTunes accounts and then use the devices to securely make purchases either online or at the point of sale.

As things currently stand, Apple Pay is accepted at 220,000 brick-and-mortar stores across the United States, including locations of mega-retailers like Whole Foods, Macy's, McDonald's, Chevron and Subway. All in all, it can be used with 35 retail brands in person and 23 store brands online. Apple Pay can also be used to make purchases through 18 apps, including Uber, Lyft, OpenTable and Airbnb.

With that being said, there are still bound to be countless questions about this new payment technology, and we'll do our best to answer them below.

How Apple Pay works

The experience of using Apple Pay will differ slightly depending on whether you're shopping at the point of sale, through an app or online. It all starts with loading your payment information into your device, however, and there are a few different ways to do that.

Loading credit card information

  1. Taking a picture: You can add a credit card or a debit card into your Apple Pay account by simply taking a picture of it with your phone or iPad. Apple will then verify with the bank that the card is indeed yours and securely store your payment details in the phone's "secure element" (a special computer chip).
  2. Entering manually: You can also enter your credit or debit card details into your phone by hand. The same verification and storage procedures as when you take a picture will then take place.
  3. Using a card from iTunes: Apple Pay is synced to your iTunes account, and you are able to simply choose to use the credit card or debit card that you already have on file.

When you load a credit or debit card to your phone, it is assigned a unique Device Account Number, which is encrypted and stored in the device's secure element. It is also saved for quick viewing in the device's Passbook. It is this Device Account Number, and not your 16-digit card number, that is then used to make purchases.

You can save up to eight different cards in your device by these means. You will also be able to select a default card for quick use or simply scroll through your various saved cards upon preparing to make a purchase.

You can load credit cards and debit cards from any of the more than 500 banks and credit unions that are part of the Apple Pay platform, including American Express, Bank of America, Barclaycard, Capital One, Chase, Citi, Navy Federal Credit Union, PNC, USAA, US Bank, and Wells Fargo.

Making purchases at the point of sale

Making a purchase at the point of sale is quite simple with Apple Pay. All you need to do is hold your phone over the contactless reader on the point of sale machine and Apple Pay will come up. You can then use the default card or choose from one of the other cards stored on your device. To complete the purchase you'll simply press and hold the Touch ID button, which scans your fingerprint for verification. Your phone will then vibrate and beep and you will receive a notification of the transaction.

Making purchases online or through an app

Making a purchase online or through a mobile app is pretty straightforward as well. Apple Pay simply shows up as a payment option with participating merchants/apps, you click on that option, and then verify using the Touch ID button. That's it.

How transactions are verified

One of the most important aspects of Apple Pay's security is the way payment information is relayed to merchants and verified by your bank. Each transaction is assigned a one-time payment number as well as a dynamic security code, and that information is encrypted and used in place of your credit or debit card particulars. As a result, cashiers will not see your name or any of your card information.

Pros and cons of Apple Pay


  • No need to carry a wallet: Simplicity lies at the heart of Apple Pay's appeal. Rather than having to carry around both your phone and a wallet, you can lessen your load by only lugging around the former. This perhaps means less bulky trousers and the freedom to leave that purse at home.

  • Security: Apple Pay utilizes near field communication (NFC) technology to communicate with merchant point of sale machines. NFC is generally regarded as a very secure form of device-to-device communication given that it carries a range of only about four inches.

    On top of that, Apple Pay does not actually store your credit card information in your phone or transmit it to merchants. When you first enter in your card details, Apple Pay assigns the payment vehicle a unique Device Account Number, which is stored in a secure computer chip in the phone and is used as a proxy for your card number when you make a purchase. That means even if your phone is lost or stolen, no one will be able to get a hold of your credit card information. Furthermore, if you do lose your phone, you can remotely wipe the card information from your phone and thereby avoid having to get new cards from the issuers.

  • Anonymity: Apple does not collect information about what you buy, where you buy it or how much you pay for it. Merchants are even shielded from your identity for in-person transactions as well. As a result, your information stays between you and your bank in most cases.


  • Limited number of merchants: While 220,000 stores are currently equipped to accept payments via Apple Pay, that represents merely 5 percent of the total number of retail locations in the United States. You therefore won't be able to use your phone as a form of payment everywhere you shop – a fact that will certainly slow adoption of Apple Pay.
  • Only available on select devices: If you don't have one of the newest Apple devices, then you won't be able to use Apple Pay. The service is only available on the Apple iPhone 6, iPhone 6+, iPad Air 2, iPad mini 3, and the forthcoming Apple Watch. Lose your phone, lose your wallet: Americans lose their phones once every 3.5 seconds, according to a report from the mobile security firm LookOut. Apple Pay simply raises the stakes of such a loss.
  • Battery dies, lose your wallet: Cell phone batteries are improving, but we all still inevitably find ourselves low on juice when we're out and about. If you're relying on your iPhone for both calling and consumption capabilities, your ability to buy is therefore only as good as your last charge.
  • Incompatible with store credit cards: As things currently stand, store-branded credit cards cannot be used through Apple Pay. This will inevitably lead consumers not to use Apple Pay when making purchases through their favorite merchants, as the benefits provided by their store-affiliated credit cards will outweigh the convenience of mobile payments.
  • Tendency to overspend: It is said that people tend to spend more when using a credit card because the money involved seems more remote and less real. It only goes to figure that this phenomenon will be super-charged with a digital wallet like Apple Pay. You don't even have to hand over your card to a merchant, swipe it yourself or even open your wallet; you just click and go.

Apple Pay competitors

Apple Pay is not the first virtual wallet to hit the market, nor will it be the last. The service, though buoyed by the supreme popularity of Apple's products, faces a few notable competitors. Some of the most popular competitors include:

  • Google Wallet
  • CurrentC
  • PayPal
  • Softcard

An overview of each of the competing mobile wallet brands, as well as links to expert opinions on Apple Pay by seven university professors specializing in technology and management – Han Zhang, David Hendrickson, James Grimmelmann, Benjamin G. Edelman, Gang Qu, Chuck Davis and Sarit Markovich – can be found at www.cardhub.com/edu/apple-pay/. end of article

The Green Sheet Inc. is now a proud affiliate of Bankcard Life, a premier community that provides industry-leading training and resources for payment professionals. Click here for more information.

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