The proof of the Apple pudding - Can Apple Pay make mobile payments popular? (Part 1 of 2)

Amidst all the excess of reviews on the launch of Apple iPhone 6, its Plus version and the Apple Watch, my attention ofcourse has been focused on the Apple Pay mobile payments platform and what it can potentially mean for the mobile payment industry. Having never belonged to the die-hard Apple fan cult (I've only recently moved to an iPhone after years of Android based phones that I used extensively and satisfactorily), I am usually skeptical about all the media hype generated around an Apple launch. 

But given all the action and unmet potential until now in the mobile payments industry (covered in my previous blog), I was keen to take a deeper dive to check if there truly were any interesting enough elements adding the masala to the Apple Pay dish. So here goes my take through a two-part blog post.

To explain Apple Pay very simply, Apple Pay provides a platform for mobile payments both, in the brick & mortar (offline) retail stores, as well as for purchases made in the digital (online) world. 

It wasn't until I saw the demos for various payment scenarios that I was able to truly appreciate how simple and easy it would be for a user to pay using Apple Pay. As a user wanting to make a payment at a store, here's what you would do:

• Once you're done shopping, and are ready to pay, hold your phone near a contactless Point of Sale (POS) terminal. The payment amount from the POS shows up on your mobile device.

• The payment card you’ve set as a default is called up on your iPhone. (If you want to pay by another card, you can pull that up and select)

• Put your finger on the Touch ID on the phone device. And your payment is through (notified via a beep and vibration on your iPhone). 

You've completed all this in a matter of seconds, and without even opening a screen or an app. Contrast this to Google Wallet that requires you to wake up your screen and, in some cases, enter a PIN to complete the purchase. (The last time I remember being this fascinated was when Square had launched its own mobile payment service. Now, amidst news of Square's cash burn and a failed takeover attempt by Apple, it is interesting that Square too will be supporting Apple Pay instead of competing with it head-on).

For a user wanting to make a payment for an online purchase, the experience is similar to the offline one. You select your product / service online (or in-app) and put your finder on the Touch ID to pay. It may go unnoticed to some, but this by itself has the potential to blur the divide between payment for offline purchase (where you swipe your card), and online (where you type in your card details), thus potentially speeding up consumer adoption.

The Apple Watch is supposed to work for Apple Pay in a similar way as the iPhone (I could not view its demo though and there are fewer details available on this yet). You double-click the button next to the Digital Crown and hold the face of the Apple Watch near the contactless reader. However, Apple Watch does not require fingerprint authentication (no Touch ID). But what it does have are skin sensors (that also track your fitness, heart rate etc.) and will tell the watch every time the wearer takes it off. So if you remove your Apple Watch, you'll have to enter your Apple Pay PIN again before you can buy anything with your wrist. Also if you're not watchful enough and if someone does manage to steal your Watch, they won't be able to use it to pay. 

There's quite a bit of neat technology at work below the surface. But in what has become first nature to Apple, the wonder of it is that all of that technology really does not (as it should not) matter to the user. Here's a look at what lies beneath to bring better speed and security of transacting for the consumer - 

NFC (or Near Field Communication, this is present in a tiny radio antenna on your mobile device, and also ofcourse needs to be present in the merchant POS too, this is what makes the two devices "talk" to each other), 

Touch ID (the fingerprint reader that makes the single-touch unlock + identity authentication + transaction completion possible), 

Tokenization (to avoid credit card frauds, this makes sure your credit card information is not transmitted every time you transact. Instead a one-time unique code is generated for every instance of a payment transaction), 

Secure Element (again a measure to safeguard your payment card details, this involves a dedicated chip in your mobile device that ensures that instead of using your actual credit and debit card numbers when you add your card, a unique Device Account Number is assigned, encrypted and securely stored in the chip), 

Passbook (this is an existing Apple feature that already stores your boarding passes, tickets, coupons, etc. With Apple Pay, it now allows you to store your credit and debit cards too by simply entering the card security code), 

iSight (this is the inbuilt camera that instantly captures your card information each time you want to add a new payment card to Passbook).

But the true proof of this Apple pudding has bound to be beyond all that cool technology and even cooler user experience. And whether or not Apple Pay will really be the tipping point for large scale adoption of mobile payments, will require a lot more ingredients cooking in the overall payments ecosystem. 

The next blogpost will cover where the differentiators may lie for Apple Pay to play a determining role for the global payments landscape.