Apple Pay system to use iPhone, Apple Watch devices for payments

IF Apple’s Tim Cook has his way, you won’t be paying by cash or using a plastic credit card — you won’t even need a wallet.

SOON, when you head out to do the shopping, the catchcry will be: “Don’t forget your phone.”

If Apple’s Tim Cook has his way, you won’t be paying by cash or using a plastic credit card. You won’t even need a wallet. Instead you’ll wave your iPhone in front of a scanner or twist your wrist to consummate payment with an Apple Watch.

It’s now a few short weeks before Apple’s revolutionary payments systems starts in the US. In Cupertino, California, last week, Apple said an update to its iOS 8 operating system in October would herald its rollout there.

How Apple Pay works

But Apple Pay won’t make it to Australia this year because, as Apple explains, unique deals have to be done in each country for it to happen. Financial institutions, credit card providers, retailers and merchants need to be on board, and agreements reached regarding how much Apple collects in transaction fees. In any case, Apple is expected to net squillions from this venture.

In Australia, local banks are reported to be keen to embrace the system and ditch what’s now regarded as less-than-fantastic plastic, especially for security reasons.

Once the system is implemented, a merchant will no longer take your credit card to scan it; they won’t know your name, credit card number, its expiry date and four-digit code.

Instead a transaction will take place electronically using a unique and encrypted “device account number” for your Apple gadget.

No one can transact using that identifier without establishing your identity on the smartphone using a thumb print. And no, a thief won’t be able to sever your finger and steal it to make payments: radio frequencies used with Apple’s Touch ID scan your skin’s sub-epidermal layers, so it works only when your finger is alive.

Apple has confirmed that iPhone payments can be made using existing tap-and-pay machines in shops. Retailers won’t need to buy new gear for Apple Pay, which should help the system roll out earlier rather than later.

To use Apple Pay, you first need to add credit and debit card details to the Passbook app already on iPhones. You use it already for storing tickets and coupons. For example, when I fly with Virgin Australia and perform mobile check-in online, a boarding pass automatically appears in this app.

For Apple Pay, if you have a credit card attached to an iTunes account, you just need to enter the card security code. If you want to add other cards, you can enter details manually, or take a photo of your card with the iPhone’s iSight camera. As Apple Pay uses biometric identification, users must register a thumb or finger with the Touch ID feature. Registration is found in handset settings.

To make a payment, you place a registered digit on the home button as you wave the phone in front of the scanner. That action not only identifies you as the purchaser, it also prevents someone else from using your phone to make payments.

Apple Pay is also gearing up for use online, with biometric identification to be used as it is now for making iTunes purchases.

Apple says credit and debit card details are not stored on the phone. Once accounts are initially verified, a credit card is identified by the device account number and stored in what’s called the “secure element”, a computer chip found in iPhone 6 and 6 Plus devices only.

The phone communicates with the retailer using short range wireless technology known as near field communication or NFC. It, too, is on the iPhone 6 series model but not earlier iPhone models. So you definitely need an iPhone 6 or iPhone 6 Plus for Apple Pay.

The upcoming Apple Watch can be used to make payments, too — you wave your wrist in front of the scanner instead of your iPhone. To identify yourself, enter a passcode while the watch is on your wrist before making a payment. To make sure a thief can’t transact from a stolen watch, access to Apple Pay is revoked when you remove the device from your arm.

Through its new Health app, Apple also is positioning itself to be the central data repository for health and activity data.

Available as part of the new iOS 8 operating system rollout now under way, the app can track almost 70 things including blood glucose, blood pressure, body temperature, caffeine level, cycling distance, flights of stairs climbed, heart rate, potassium levels, sleep analysis, steps and even falls.

The M8 co-processor in iPhone 6 and 6 Plus provides some of this data, for example steps and flights of stairs climbed. You can also enter data manually. Eventually most data will come from third-party devices that populate the health app.

Nike, Jawbone, Fitbit, Withings, Strava, RunKeeper and Wahoo Fitness are understood to be preparing to forward data collected by their own apps on to the Apple Health app.

For example, sleep data gleaned by a Jawbone Up device and synched with the Jawbone Up app on an iPhone will be pushed to the Apple Health app and displayed in the app’s extensive health data dashboard.

The interesting development here is that Apple is reported to be negotiating how the data can be used by hospitals and clinics.

Appleinsider reports Apple is working with the Mayo Clinic on an app that lets hospitals be contacted if any data in the Health app reaches dangerous levels.

So if your blood pressure rises to extreme levels, your phone in future may inform your hospital, doctor or carer. The applications for the iPhone monitoring the elderly are obvious.

Apple is also seeking a dominant role in the emerging home automation market. It wants internet-connected home lighting systems, air conditioners, garage doors and security cameras to connect to the iPhone through its HomeKit system.

So far, connections are piecemeal, with vendors such as Philips and Belkin producing their own software and apps for controlling their Wi-Fi-connected lighting systems.

Using HomeKit, consumers will eventually be able to collate their internet-connected devices into groups, such as rooms or floors, and control them individually and in those groups from an iPhone or iPad using Apple software.

In the past, a major reason for choosing an iPhone was its unrivalled quality apps. Now the company wants you to choose Apple to enjoy its payments systems, and co-ordinated health and home automation features.

Chris Griffith travelled to the Apple launch event at Cupertino courtesy of Apple

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