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Opinion: Why Apple Pay is a really, really big deal for, well, everyone

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Over the years, Apple has been accused of many things. Right from the inception of the company – known then as "Apple Computer" – critics have lambasted the executive team, products and vision. Even today, "haters" take to the comment sections of blogs in their droves to take aim at earnings, new products, changes to management and so on.

The death of Steve Jobs, co-founder and the visionary behind what Apple is today, rocked the company to its core leading to speculation that the firm could never return to creating blockbuster, market-leading products.

Check out these other Apple Pay opinion pieces

Cooking up profits

Tim Cook, Jobs' replacement, has taken a mild mannered approach, by all accounts, preferring a cool, calm and collected attitude over Jobs' often rash and angry behaviour. So far, Cook has taken Apple to places of even more profitability – in fiscal 2013 Apple made $171 billion (around £105 billion, AU$193 billion) in revenue, of which $37 billion (around £23 billion, AU$42 billion) was profit – but he has brought no new products to market, beyond refinements to the existing stable.

At least, that was the case until September. The dust has just settled from the keynote event earlier this month, held in the same location Jobs used to unveil the original Macintosh in 1984, during which Cook revealed two new iPhones in two sizes, the Apple Watch and Apple Pay.

The mainstream press has paid the majority of attention to the new iPhones – now in larger sizes to compete with Samsung – and the Apple Watch, which will be available in "Spring 2015" and costs $349 (around £215, AU$395) upwards. What has been omitted from this coverage is Apple Pay, one of the most exciting projects Apple has ever launched.

Many expected Cook to simply unveil a watch and some new iPhones – both of which are set to sell at record levels, and indeed the iPhones did so, shifting in excess of 10 million units over the first weekend – and not much else. They were wrong.

Analyst concerns

For analysts, only introducing new iPhones and the Apple Watch was worrying: Apple, as a company, needs to diversify its portfolio, they say, before the market for smartphones – especially high-end models – stagnates. The iPhone makes up nearly 60% of Apple's revenues so the concerns are somewhat legitimate.

Expanding into the larger screen space does open Apple up to a large amount of new customers and, most importantly, cannibalises the sales of Samsung's Galaxy Note and other Galaxy devices, which have long since taken sales away from the iPhone. As for the watch, whether Apple can lead the "smartwatch" space and entice people away from their own watches is still up for debate – and that won't be decided until 2015.

Enter Apple Pay. In an interview with Charlie Rose, Tim Cook spoke about how the features and devices released now are going to be used by Apple in different ways over the coming years. While they may look standalone at launch, in the future they will be utilised in different ways and will be integrated with new products. Apple Pay is one such thing.

The premise behind Apple Pay is simple: instead of having cash or a card, you use the NFC chip inside your iPhone (and Apple Watch) to pay for things over the counter. Apple has partnered with all of the major American banks and has signed up hundreds of thousands of retailers.

Apple Pay works because customers will likely buy the iPhone 6 and iPhone 6 Plus - and, later, the Apple Watch - unaware of Apple Pay. They will buy the new iPhones because they like Apple products, are due an upgrade or thought the iPhone was the best phone on the market and so on.

Over the coming months, Apple will heavily promote Apple Pay and more and more retailers will sign up. People with the new iPhones - over 10 million, according to Apple - will then sign up to Apple Pay and start actively using it.

Apple could be the one

While many companies have tried to get virtual wallets off the ground before – Google Wallet being the most famous example – Apple could gain the critical mass needed to bring cash- and card-less transactions to the mainstream. As we already mentioned, in the first weekend, Apple has sold over 10 million iPhone 6 and 6 Plus handsets, which means that the company effectively has over 10 million people equipped to use Apple Pay right out of the gate.

Apple also created a large incentive for retailers to make their checkouts Apple Pay compatible. Instead of taking a cut of the retailers' profits – as Square does – Apple instead negotiated with the banks to take a 0.15% commission from their side, an unprecedented move.

"We want to invest in programs that respect our role in the ecosystem," James Anderson, senior vice president for mobile product development at MasterCard, told the New York Times. The incentive for the banks to cooperate with Apple Pay is, according to the Times, because banks will now be opened up to transactions that usually would've occurred using cash. Many shops have a "minimum spend" limit on credit and debit cards whereas Apple Pay would enable a customer to spend as much or as little as they wanted using just their phone.

Security first

In the name of security, Apple is using TouchID to authenticate transactions with Apple Pay. As long as a finger or thumb is in contact with the TouchID pad, the transaction will commence – when the contact is broken, the transaction fails and must be restarted. This system is attractive to the banks as it cuts down on credit card fraud. A pin number or signature can be faked or stolen, a card can be found and used online, and cash can be spent, but a fingerprint is invulnerable to all of these failings.

Of course, whether Apple Pay will be a success remains to be seen. All previous attempts have failed and getting people to ditch cash will be a tough task for Apple. But as more and more retailers sign up, and more and more iPhone users invest, Apple Pay can only get better and better – and the money Apple will make can only grow and grow.



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