This week sees a landmark in digital payment technology in the UK with the launch of the Apple Pay system.
Apple Pay means that iPhone 6 owners will be able to make in-store purchases by simply waving their handset – or an iPhone-linked Apple Watch – over a payment terminal.
This technology is a form of digital wallet, which lets you store details of your various credit and debit cards securely on your phone, and then choose which one you want to use to make a payment.
The main advantages offered by digital wallets are convenience and speed – rather than delving into a handbag for a card, tapping in a PIN and waiting for authorisation, payments can be made in a couple of seconds. This is not very different from the contactless debit cards that are increasingly available in the UK – but a digital wallet has the added attraction of being able to carry details of multiple accounts.
Initially, Apple Pay purchases will be limited in many cases to the £20 maximum that is currently imposed on contactless card payments (this is due to rise to £30 in September).
This is because a large number of retailers will at the outset be using the same terminals, and the £20 limit can’t be overridden on an ad-hoc basis.
But there is less justification for a ceiling on Apple Pay sales, as the system is designed to be more secure: in order to make a purchase with an iPhone, the user will have to use their fingerprint to confirm their identity. With contactless cards, on the other hand, there are no identity checks and you don’t need to know the card’s PIN in order to use it.
Once older terminals have been updated, they will be able to accept Apple Pay purchases of any value – and the necessary upgrades are expected to happen over the next few months.
Digital wallets also offer security in the way payment information is transmitted to retailers: this is through a system called tokenisation, which means that a unique, one-off code is generated for each transaction. This is sufficient for the seller to debit the customer’s card but it can’t be used again and it does not reveal account details.
The tokenisation system will also be available for use online, so Apple customers will be able to make in-app purchases from certain retailers without going through the rigmarole of typing in card details.
Whether you will be able to take advantage of Apple Pay depends not just on you having the right phone, but also on whether your bank and any retailers you want to use have signed up to be part of the scheme.
Natwest, HSBC, Santander and Nationwide customers will be able to use Apple Pay when it launches this week, but Halifax and Lloyds account holders will have to wait until the autumn. Barclays, on the other hand, says only that it is currently in negotiations with Apple.
As far as retailers are concerned, there are already a lot of big names on board, including Waitrose, Marks & Spencer, McDonalds and Starbucks, as well as Transport for London. A full list can be found on the Apple website.