Apple Pay

The third punch in the Apple show was the biggest, in my opinion.  Again, on the surface it appears to be catch-up but this is much more significant.

The competition liked to throw in an NFC antenna and then claim it was a feature, but without deep integration all it is is more hardware.  Yes you could tap to pay, but you can also do that with your credit card.  Why introduce a phone into that?  I realize there were some apps like a google Wallet that integrated with that, and that’s a good start, but missing the last step.

What’s the last step?  Security!  Apple Pay runs only on phones that have TouchID, and the Apple Watch that has a simple form of biometric security (apparently it remains unlocked only with continued skin contact on the back of the watch).

The best (and most secure) component of this whole platform is invisible to users.  The channel between banks and Apple is HUGE.  I can only guess at the infrastructure, but if you think about it, it might be something like this… the phone (I presume) generates an asymmetric key and stores the private one in an enclave on the phone and registers the public one with the bank.  When a transaction takes place, it probably creates a transaction packet with the purchase details and signs and encrypts it, passes it through to the Bank.  The credit card details are nowhere in the transaction.  No signature, no PIN, no card number or CVC.  Apple is in the loop somewhere, but they claim they never see any purchase details.  Perhaps they check the signature, match it to a user, and pass it along as an inter-bank transaction.  Since the bank is RIGHT NOW already tooled up to accept this, they likely didn’t have to make significant changes to their back ends.

Talking through my hat of course, but it has to be closer to this than any current tap-to-pay tech.

The bottom line is, Apple isn’t trying to make credit cards more convenient, they’re trying to replace them.  They’re setting themselves up as part of the infrastructure of daily commerce, which is much much bigger than selling a few technology items.  They think much bigger than “slap an NFC chip in there”, and it’s going to have a big impact in the years to come.