Owners of the latest iPhones will soon be able to make payments in shops around the country using their handset courtesy of Apple Pay, the new system from the world’s most valuable company.
What’s this all about? After years in development, Apple came up with the system that allows customers who have its newest model, the iPhone 6 (or the Apple Watch), and one of the 70% of UK bank cards that will be compatible, to go shopping with just the phone. That’s the theory, at least.
How does it work? Apple Pay essentially uses the same technology found in contactless bank cards – and the same retailer terminals. The iPhone 6 and the Apple Watch feature “near field communication” chips that allow the phone to “talk” to the terminal.
Users have to upload their bank card details to their phone. Once it is set up, they will be able to pay for goods by holding their phone near a shop’s contactless card reader.
To verify that they are the phone’s owner, they have to place their finger on the Touch ID fingertip recognition button as they make the purchase.
Apple says that from July (a precise date has not yet been disclosed), more than 250,000 UK locations will accept Apple Pay. It says it has signed up eight of the UK’s biggest banks. Users will also be able to use Apple Pay to make in-app purchases – booking airline tickets and the like – on their phones and Touch ID-enabled iPads.
Will it work on all iPhones? The only iPhones that have the required technology built in are the iPhone 6 and the iPhone 6 Plus.
Which banks are signing up? First Direct, HSBC, NatWest, Nationwide building society, Royal Bank of Scotland, Santander and Ulster Bank are on board now, and their customers will be able to start registering their existing credit and debit cards at launch, as will American Express cardholders. Lloyds Bank, Halifax and Bank of Scotland customers will be able to join in a little later – from “the autumn”. The same goes for MBNA, M&S Bank and TSB cardholders.
Any refuseniks? So far, Barclays is yet to commit – which is perhaps odd as it has been at the forefront of introducing technology into banking, and has largely led the contactless movement in the UK. It says that the talks that have been taking place “remain constructive”.
Where will I be able to use it? Anywhere you can currently make a contactless purchase – including the entire Transport for London network. Participating fast food and coffee chains include Pret a Manger, McDonald’s, Costa Coffee, Starbucks, KFC and Subway. Retailers include Tesco, Marks & Spencer, Waitrose, Boots, BP, Spar and Lidl, to name just a few.
Isn’t there a £20 limit on contactless payments? There is, though it is rising to £30 in September. In most cases Apple Payers will, in the short term, have to keep to the same limit. However, Apple says a few chains have installed upgraded systems to enable higher-value payments. This is because the system is secured using the phone’s fingerprint reader.
In-app payments, which will also work on the two newest iPads, the iPad Air 2 and iPad mini 3, are only constrained by your bank balance or credit limit.
How secure is it? Apple Pay requires authentication through Apple’s Touch ID fingerprint scanners before it will authorise a payment. The exception is the Apple Watch, which remains unlocked while on its owner’s wrist. However, each time you take the watch off your wrist, you have to enter a passcode to access it again.
Apple says the system is more secure than traditional card payments because the credit card data is never transferred to the merchant. Neither, (victims of the recent iCloud hack will be reassured to learn), is the data stored on Apple’s servers. Instead, a single-use “cryptogram” is sent to the merchant, which authorises a single transaction of a specified amount. It can only be sent once, outlawing multiple payments.
Experts say the biggest weakness comes from the potential threat of iPhone users registering other people’s bank cards. The banks will be putting processes in place to stop this happening – identifying cards and making sure they are registered to the phone’s owner.
Visa says cardholders using Apple Pay will be covered by the same benefits they currently enjoy with their debit and credit cards – meaning it promises to reimburse cardholders for unauthorised purchases.
Meanwhile, are you happy about Apple knowing even more about you than it probably already does? According to Retail Week, one bank that the tech giant was talking to about Apple Pay “was reportedly uncomfortable with the amount of personal and financial data Apple aims to collect about its customers”.
This was introduced in the US, wasn’t it? It was – it’s fair to say with mixed results. Some retailers were forced to turn it off after queues developed. Analysts suggest Apple Pay will do much better here because the UK already has the contactless payment infrastructure in place – something that is largely absent in the US.
What are people saying about it? Ernest Doku, technology expert at uSwitch.com, says the sophisticated security features should alleviate fears that paying by mobile isn’t secure.
“When the world’s biggest company wades in to mobile payments, you know it’s going to be a game-changer. For now, one of Apple Pay’s biggest limitations is that it can only be used by owners of the newest Apple devices. For that reason, we may have to wait years for Apple Pay-ready devices to percolate down the market into cheaper territory before the tech giant truly changes the way the UK pays. That said, contactless is already a mature and established payment method, so Apple may find that we’re a far more receptive audience than in the US.”
The banks were this week engaged in an Apple love-fest, hailing its introduction in effusive terms – such is the power of the brand with Nationwide launching a new Apple Watch app this week.
What’s the Guardian Money verdict? When we tried early (non-Apple) mobile handset payments, we found them too slow and clunky. In short, it was quicker to pay by card.
If Apple Pay can be as fast as the current contactless card payments – and it remains to be seen whether it will be – you feel it will be a winner. If it is slower and users resort to getting their bank card out instead, it will struggle.
Apple will also hope that more retailers and banks will be happy to accept higher-value payments, which will largely be dependent on how secure the system turns out to be. A continued £30 contactless purchase limit would certainly curtail its mass take-up.
