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How Does Apple Pay Work? (AAPL)

Author: Michael Harris

Apple Pay is a revolutionary creation brought about by Apple Inc. (NASDAQ: AAPL). Initially released in October 2014, the mobile payment service was formatted specifically to aid in the ease and security of financial transactions. Since the majority of mobile phone users worldwide choose to purchase smartphones over basic phones, and with Apple being the top seller of those smartphones, it comes as no surprise that more and more businesses and smartphone subscribers alike are opting to participate in Apple Pay.

A Mobile Wallet

Put generally, Apple Pay works as a mobile wallet for credit cards, substituting for a user's physical wallet. To set up the service, the Apple user is prompted to upload the information from his various credit cards into the Apple Pay application, known as Wallet.

Most major credit cards, store credit cards, debit cards (depending on bank involvement) and rewards cards can be entered into Wallet and used in Apple Pay. Like its predecessor, the Passbook app, the new and improved Wallet also can store non-credit card items, such as boarding passes and tickets.


It is important to note that Apple Pay is only available on the newest versions of the iPhone: the iPhone 6, iPhone 6 Plus, iPhone 6s and iPhone 6s Plus. Apple Pay can also be used on the iPad Pro, iPad Air 2, and iPad Mini 3 and 4, but the iPad usage is only available for online transactions, such as in-app purchases with participating companies (such as the Target app).

The only Apple products that allow for Apple Pay usage in store are the specified iPhones and the Apple Watch, as long as the watch is paired with an iPhone 5 or newer.

The setup instructions within Wallet are simple, complete with detailed, step-by-step prompts on how to add various cards. After uploading the card information, all necessary payment information is linked to the app, and the user need not ever handle a physical card for Apple Pay transactions.

Paying With Apple Pay

The physical act of paying with Apple Pay is quite possibly the simplest step in the process. The user selects the card that he wants to purchase with, and then holds the iPhone over the merchant's Apple Pay reader. The user must keep his finger on the Touch ID for security purposes, and then the transaction is made electronically.

Participating Businesses

Apple Pay hasn't been incorporated into every store or business yet. However, its popularity is growing. Apple's website has a listing of the businesses that currently participate in Apple Pay, as well as a listing of apps that use or will be using Apple Pay. There is already a wide variety of merchants – from fast food restaurants such as McDonald's and Jamba Juice, to supermarkets such as Whole Foods, to clothing stores such as Bloomingdale's and Macy's.

Security and Privacy

One of the most prominent and attractive features of Apple Pay, aside from it being so easy to use, is the heightened level of security that it has to offer. The fingertip recognition software for the Touch ID ensures that the purchases are being made by only the user. In addition, Apple keeps the transaction details completely private to every entity by not storing any details and not submitting credit or debit card numbers to the merchants.

Among the user reviews, the most common negative review for using Apple Pay stems from paying with the Apple Watch. The level of security is reduced a bit when paying with the watch, because the watch doesn't have the Touch ID option, and, therefore, the user has to physically push a button.

Despite its few drawbacks, Apple Pay provides users with security, allowing them to go to the mall without worrying about dropping a credit card, losing a wallet or having their card information stolen.

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