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Apple Pay Goes Live

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Last Friday, we mentioned the imminent launch of Apple’s (AAPL) new mobile service, Apple Pay. And now it’s here!

In fact, it just went live yesterday. The question is, though: Will shoppers now be persuaded to ditch traditional cash and credit cards and jump on the Apple Pay bandwagon, instead?

To recap, here’s how it works: With their payment information stored in Apple’s Passbook app, customers simply hold the new iPhone (or soon-to-be-released tablets and smartwatches) in front of the participating retailer’s NFC payment reader at the till… and voilà! The purchase is made! It’s that easy. The reader automatically processes the transaction with the user’s payment information stored on the device.

Is It That Safe?

But with ongoing cyber security and hacking concerns, what’s to stop thieves from stealing confidential payment info stored on the devices?

Glad you asked.

The card information is converted into a token. Think of it as an alias for the credit card number.

Taking security to another level, the token is then stored on a chip and not Apple’s servers. Analysts predict that the app won’t be perfect right away… but we will see a jump in customer loyalty for Apple’s products.

Already, Apple has teamed up with six major credit card issuers, which will handle over 80% of credit card volume. It also has three major card processors in on the deal, too – American Express (AXP), Visa (V), and MasterCard (MA). The company has also 500 banks nationwide.

As of now, Apple Pay works at over 220,000 locations. At this very early point, it’s really a popularity contest. No one likes to be left out. And while card companies may make a small percentage per transaction with Apple, they’ve jumped on board anyway – figuring volume will make up for the difference in commissions.

Here’s a curious fact, though: The world’s biggest retailer, Wal-Mart (WMT), has yet to join up with Apple Pay. For now, both it and Best Buy (BBY) are sticking with an Android-based rival.

Tech Research Team