Apple Pay puts NFC and security front and center

Apple (NASDAQ:AAPL) introduced a series of new products including new iPhones and a wearable, but it's the long awaited mobile payment option, Apple Pay, that will tie together hardware, software and retail in an entirely new way.

The series of announcements are among some of the most important advances in the mobile retail space. Apple Pay supports American Express, MasterCard and Visa, lets users link their iTunes payment information and works only with the iPhone. Big retailers are already on board including Bloomingdale's, Disney Store and Walt Disney World Resort, Duane Reade, Macy's, McDonald's, Sephora, Staples, Subway, Walgreens and Whole Foods Market.

Apple's new wearable, Apple Watch, will also work with the payment system.

And while Apple's iBeacon has been edging out NFC for in-store connectivity and mobile messaging, NFC is the technology of choice for use with payments. Shoppers can either tap to pay at a terminal or use Apple's Touch ID biometric technology.

"Apple's foray into NFC is a landmark and will ignite the mobile payments market globally, but especially in the U.S. where adoption has lagged," said Pascal Caillon, general manager North America, Proxama. "NFC is the technology for point of sale payments and aligns with the card scheme work we have been doing for years, but now there is even more impetus for merchants to roll out contactless payments beyond the initial supporting merchants that apple announced today."

A selling feature of Apple Pay is its security, and comes at a time when data breaches and fraud are at an all-time high.

"Security and privacy is at the core of Apple Pay. When you're using Apple Pay in a store, restaurant or other merchant, cashiers will no longer see your name, credit card number or security code, helping to reduce the potential for fraud," said Eddy Cue, Apple's senior VP of Internet software and services. "Apple doesn't collect your purchase history, so we don't know what you bought, where you bought it or how much you paid for it. And if your iPhone is lost or stolen, you can use Find My iPhone to quickly suspend payments from that device."

Security issues are key and the timing is right for this product. A year ago consumers yawned when asked about security or privacy concerns. Then Target had a massive data breach, followed by Neiman Marcus, Michaels, Sally Beauty and now Home Depot.

Checkout lanes at all Whole Foods Market stores already accept industry standard NFC payments via pads at store checkout registers. And Target, perhaps the largest retailer to suffer a high-profile data breach, will begin accepting Apple Pay in October.

"Apple's use of the secure element in the device, and the fact that Tim Cook spent a good deal of time talking about the importance of consumer privacy considering transaction data, is exactly in line with what we have been working on within our CardGateway product, with our work with ARM and Trustonic for TEE on security, and with our many customers like Barclaycard, MasterCard, Softcard (formerly ISIS) and others in other markets," said Caillon. "The cryptography measures Apple described are in line with what we have done, and will also help allay both merchants' and consumers' potential worries about security, and ultimately help adoption of mobile payments thrive."

"With this announcement, Apple validates the data-centric security model, and shines a spotlight on the need for the payment world to move on from vulnerable static credit card numbers and magnetic stripes to protected versions of data–tokenized payments," said Mark Bower, VP of product management for Voltage Security. "Through the use of this data-centric security strategy, Apple Pay reduces the risk of data breaches and credit card theft where it is supported."

Convenience is no longer the biggest selling point for mobile wallets and while Apple Pay certainly provides a simple mobile payment method, it really ticks the more important security box.

For more:
-See this Apple announcement
-See this Target blog post 

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