Why Apple Pay Will Take Over the World

Mj 618_348_the folly and futility of resisting apple pay
Justin Sullivan / Getty Images

Like most things Apple, the company’s contactless payment system became a target of opportunity within days of its announcement. Professional doubters pointed to past flameouts in the digital wallet space, and wondered why Apple Pay would fare any better than the likes of LevelUp, Google Wallet, or any of a seemingly countless number of niche products that have yet to achieve mainstream adoption.

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We’ve been here before with Apple. From the iPad naysayers, who held that earlier tablet computers had been niche market non-starters for years, all the way back to the iTunes critics, who scoffed at the lesser audio quality of digital files (compared to CDs), and who dismissed the iPod as an overpriced latecomer to the MP3 Player party. It’s not that Apple is infallible, or unstoppable. The Newton vanished, and the best that can be said about Apple TV is that it still exists. But Apple Pay is precisely what Apple does well. It’s the right mix of hardware and software, at the exact right time — after others have demonstrated proof of concept, but before anyone else can claim anything close to victory. Here’s why, whether you like it or not, Apply Pay is Cupertino at its most unstoppable.

1) Passwords are dumb. Biometrics are smart.
A decade or two from now, we’ll look back on this era with embarrassment. I don’t mean the future shame of having dithered away so many hours on Facebook, arguing with friends-of-friends about their abhorrent politics. I’m talking about the dreadful state of digital security, due to the antiquated procedure of protecting a dozen different caches of personal and financial information with the same dumb password. And that’s not even counting all of the devices and services for which we simply left the default password—that would be “password” — unchanged. Long before the iCloud celebrity photo-dump scandal from earlier this year, hackers were routinely guessing, remote-logging, or simply brute-forcing their way through password defenses.

Apple Pay is the first glimpse of our post-password future. It lets you pay without entering a password or PIN. Sure, you still need to set up a password for your Apple ID, but since the majority of the authentication you’ll be doing amounts to pressing a thumb to the iPhone or iPad’s fingerprint scanner, you can easily switch that password to something truly unique — one of those jumbles of numbers and upper and lower-case letters that security experts recommend — and more challenging to crack. Vulnerabilities will no doubt surface, but, for now, this kind of biometric security is as close to bulletproof as authentication gets.

2) It could stop (or limit) point-of-sale data breaches.
In recent years, point-of-sale data breaches have become a sad fact of life, and an apparent cost of both doing business, and of shopping at major retailers. Most POS breaches are the result of malware, which scoops up credit card information into resellable bundles that might compromise hundreds of thousands, if not a hundred million or more customers at a time. The biggest retailers and financial organizations are supposedly taking a range of drastic actions to prevent future attacks, including credit card companies requiring the installation of newer, more secure terminals through the U.S. in 2015. But after so many years of doing nothing (or nothing effective, at least) to protect their customers, the smart response is to hope for the best, and prepare for the worst.

Apart from living like a wanted fugitive, and paying for everything with hard cash, one of the only current options for steering clear of POS breaches is Apple Pay. That’s because an Apple Pay transaction doesn’t leave your credit card number stored in the retailer’s system. Instead, the service generates a one-time, device-specific number, which is tied to your iPhone or iPad. These transaction numbers are of essentially no value to hackers and black market data resellers. Apple Pay makes POS breaches irrelevant, at least to the feature’s users.

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3) Tap-to-pay is about to become the rule, not the exception.
POS breaches aren’t much of a concern for small businesses, whose systems generally don’t store enough customer data to become an attractive enough target for hackers. But since financial institutions are demanding terminal upgrades from all participating retailers, mom-and-pop shops who want to keep accepting credit cards have no choice but to adopt many of the same new security measures intended to help chain stories. And with those new terminals will come the widespread ability to accept payments via NFC (near-field communications) chips, like the one found in the new iPhones.

In other words, even when you read snippy headlines about how small businesses aren’t interested in Apple Pay, realize that the feature doesn’t need to become instantly ubiquitous. Callous as it sounds, it doesn’t really matter what the local players think of Apple Pay in the weeks or months to come. Apple isn’t a startup begging for funds and fame on Kickstarter, and Apple Pay is showing up just in time to take advantage of the near-universal rollout of NFC-based transactions.

4) It’s iTunes all over again.
Remember all of those competing digital music distributions services that either predated or co-existed with iTunes? Neither do we, except as free-standing punch lines (the Zune Marketplace) or as evidence that corporations often can’t admit defeat (Sony Music Unlimited). Which is why stories about companies like CVS and Rite Aid declining to use Apple Pay, in favor of other tap-to-pay systems, inspire such strong deja vu. Just as the iPod and iTunes weren’t the first of their kind in the digital music space, there have been phones with NFC chips for years, and terminals and networks that allow for such phones to make payments with a tap. For what it’s worth, I reviewed a Zune back when they were new, and found it to be a great piece of hardware with a slick interface. But iTunes had already gained a foothold, and Apple simply had too much momentum.

Just as Microsoft never stood a chance, networks like CurrentC — which CVS and Rite Aid are planning to use exclusively for NFC transactions — can’t compete with Apple’s brand awareness, or with the momentum that comes from having already convinced more than a half-billion people worldwide to set up Apple IDs with associated payment information. Plus, CurrentC has already been hacked, in what was a relatively minor breach (it was in beta at the time, and many of the compromised e-mail accounts were dummies), but still a rough bit of early press for a service that’s barely a month old. While CurrentC and similar networks face the uphill battle of convincing enough new members to join to justify their existence, iTunes and the App Store have already collected enough users to turn Apple Pay into a juggernaut.

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5) It’s the single best reason to buy an iPhone.
Finally, there’s the fact that Apple has turned NFC payments into a selling point for its hardware. The company can no longer assume that its phones will beat, or even necessarily compete with all of the components and specifications found in high-quality Android models. Apple needs something to differentiate its devices. Apple Pay does exactly that. It has the potential to streamline all but the most complex financial transactions, including purchases made in person, or online. It’s more secure than broadcasting your credit card numbers, or letting retailers hold onto them. And the appeal of Apple Pay only grows as more people buy and use iPhones, and more businesses try to capitalize on what appears to be the most popular iPhone generation in years, with some 39.2 million sold in the first nine days, compared to 33.8 million over the same period in 2013.

There are technical wrinkles still to be ironed out — despite Apple Pay being accepted at an impressive range of businesses, such as McDonalds, Office Depot, and the Disney Store, users have reported spotty overall performance. But services like these can take years to become consistently useful, and then completely dominant. When Tower Records vanished in 2006, it had been a half-decade since iTunes first launched. Apple’s most transformative products lay waste to their competitors over the course of multiple upgrade cycles, just long enough for the doubters to revise their perspectives, and claim they had seen the company’s latest coup as inevitable all along.

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