Apple Pay: The Mobile Payment Revolution

It's no secret that I was a little skeptical about how successful Apple Pay, Apple's mobile payment system for the iPhone 6 and iPhone 6 Plus, would be. After a single use at my local grocery store, however, I have no problem saying I was wrong. In fact, Apple made using your iPhone for credit card payments so easy I'm seeing a big problem for competitors hoping to get in on the mobile payment game, including Wal-Mart and its CurrentC system.

Apple Pay looks like the catalyst NFC mobile payments needsApple Pay looks like the catalyst NFC mobile payments needs

My skepticism over the potential success for Apple Pay wasn't that I thought Apple designed a system flawed in such a way that it would fail. Instead, it was based on consumer and retailer apathy towards using smartphones as proxies for our credit cards. Even something as simple as the chip and PIN system for adding security to credit card transactions has met with resistance in the United States, and NFC-based payment systems — like Apple Pay — have been perceived as unreliable, complicated, and not particularly secure.

Best Buy tried using NFC systems for credit card payments a few years ago, but eventually abandoned the program because it didn't live up to expectations and cost more than the company liked. Cashiers at other retailers have routinely warned customers away from smart card and smartphone payment options saying the systems don't work.

When retailers and customers alike aren't interested in supporting a new payment system, companies hoping to push their platform have a big hurdle to overcome, and that's what I was concerned Apple would be facing. What I found was that store employees and my fellow customers were very interested in seeing Apple Pay in action.

My first Apple Pay experience started with me asking the cashier at my local Ideal Market (a subsidiary of Whole Foods) if they supported Apple Pay. She replied with an emphatic "Yes!" and asked if I was going to pay with my iPhone because she wanted to watch. The customers in line behind me were intrigued, too, as if I was about to perform an act of wizardry far beyond the understanding of mere mortals.

The payment process was fast and simple; My iPhone woke up when I waved it over the card reader, it showed me which credit card I was about to use, and all I had to do was touch my iPhone's Home button and I was the proud owner of a bag of apples.

The interest and enthusiasm I'm seeing for Apple Pay stands in stark contrast to the reception I've seen for other smartphone-based mobile credit card payment systems and for chip and PIN cards, too. That's the big winner for Apple Pay, and for the first time I'm seeing significant numbers of people wanting and expecting to use their smartphone as an alternative to pulling a credit card out of their pocket.

Apple's iPhone already has significant marketshare, and the new 6 and 6 Plus models are selling as fast as the company can make them. Every new iPhone sold adds another person to the list of potential Apple Pay users, and that group is already over 10 million strong.

Apple Pay isn't the first smartphone credit card payment system, but it is the first where significant numbers of people are showing real interest. My cashier at Ideal Market told me she's an Android phone user and couldn't wait for a mobile payment system, not realizing Google Wallet was already available. I'm sure my cashier isn't the only Android device user who doesn't know their smartphone supports NFC-based payments, and that's been a problem in getting consumers and retailers on board.

Apple is the late comer to smartphone mobile payments, and is still showing up with a big advantage because iPhone owners know about Apple Pay and want to use it. Apple has done more in a single week to raise interest in mobile payments than Google has done since Google Wallet launched in 2011.

A big part of what makes Apple Pay so enticing is that Apple made the system drop dead simple, plus it adds a level of security that isn't available when you swipe your credit card through a reader. Apple Pay transactions link to your card, but they don't use your card number and instead use a one-off token to validate the purchase. Since your card number isn't involved, it can't be intercepted and used without your permission.

Contrast that with CurrentC, the system some retailers are backing as an alternative to NFC-based payment systems like Apple Pay and Google Wallet. It links directly to your bank account, tracks all of your purchases along with health and fitness-related information, and requires a special app on your smartphone that displays a QR code to process transactions.

CurrentC is a system designed by a committee of retailers trying to cut out credit card companies. This is all about retailer's interests and not about customers, and I can't imagine putting direct access to my bank account in the hands of the same companies that couldn't keep my credit card number safe.

CurrentC's biggest chance for success will also be its likely downfall: It's an exclusive system and retailers that use it are barred from competing options, including NFC. Rite Aid, CVS, and other companies have already shut off their NFC card readers to block Apple Pay and Google Wallet in favor of a transaction platform that won't launch until some time in 2015. To be clear: these retailers are choosing to not take customer's money and instead are waiting on an unproven transaction system that's far more cumbersome and less secure than Apple Pay.

I've found I'm already thinking about where I shop based on whether or not I can use Apple Pay, and this is coming from the guy who was questioning whether or not the system had a chance at success. Now I'm questioning which retailers will stay in business based on their support for NFC and Apple Pay — and it all started with a bag of apples.