Fed up with fumbling around for your cash and cards? David Crookes explains how Apple Pay and other contactless payment services are turning our phones into wallets
What is it?
Contactless payment marks the latest move towards a cashless society. Not only does it let you make physical financial transactions without notes or coins, but it also removes the necessity to insert a card into a chip-and-PIN machine.
How does it work?
Compatible phones, tablets and smartwatches have Near Field Communication (NFC) chips that wirelessly transfer tiny bits of data over a very short distance. When used in combination with a payment processing app, NFC lets you complete transactions in a shop or restaurant without using cash or a card. Just wave your mobile device over a payment reader to draw money from your account.
Which companies are involved?
The biggest new player is Apple, which is set to introduce its contactless payment system, Apple Pay, in the UK within the next few months. When Apple Pay launched in the US last October it attracted a million registrations within three days, making it the largest contactless payment system for smartphones and smartwatches in the world. But other companies, including Google, Samsung, Microsoft, PayPal and several mobile operators are also poised to take a slice of this emerging industry because its potential is so huge.
Is my phone or watch compatible?
Apple Pay only works on Apple devices, and even then it’s limited to the iPhone 6 and 6 Plus, and the Apple Watch. Although there are NFC chips in the iPad Air 2 and the iPad Mini 3, neither can be used for payments because they haven’t yet been activated by Apple. If you own a fairly new Android phone, it’s very likely that your phone will be NFCenabled, so check online to see if you can use one of the other contactless services.
How does Apple Pay work?
Apple Pay uses your iPhone’s camera to take an encrypted picture of your credit card (or to input the numbers manually). Once the payment system has been approved by your bank, you’re ready to go. When you pay for an item, you place the handset on the retail terminal and either put your finger on the Touch ID fingerprint scanner or tap in your device’s passcode. This confirms you are who you say you are and the payment is processed.
If you’re using the Apple Watch, you double-press the side button and hold the face of the watch to the contactless reader. It will beep to tell you the transaction has been approved.
Why not just use a card?
The theory is that you could leave your wallet at home and just take your phone out. In practice, you will most likely still need a card or cash to pay in places that don’t have a contactless payment system that’s compatible with your phone.
Are there any limitations?
Yes. All contactless payment systems in the UK have a spend limit capped at £20 (rising to £30 in September), and this is expected to be the same with Apple Pay. But because so many people have their phones virtually glued to their hands, contactless payment is seen as more convenient. As confidence in the security of contactless payments rises, the spending cap is likely be increased, too.
Is Apple Pay secure?
Apple says it’s more secure than using a credit or debit card. When you hand over your plastic, the recipient can clearly see your card number and identity, but Apple Pay doesn’t divulge this information. Instead, it assigns a unique Device Account Number (DAN) to a Secure Element chip inside your iPhone or Watch. The retailer only sees the DAN and a unique code that is generated on the fly for additional security.
What if I lose my phone?
You should go to iCloud’s Find My iPhone tool at https://www.icloud.com/#find, sign in with your Apple ID and password and put your handset into Lost Mode. Find My iPhone will then suspend your cards. You could also, if you wish, permanently disable Apple Pay’s ability to make payments via your phone, or call your bank and ask it to suspend or remove cards from Apple Pay.
Can I use Apple Pay within apps?
Apple Pay already lets you make purchases through third-party apps in the US and there is no reason why the same won’t apply over here. Compatible apps include Airbnb, Eventbrite, Groupon, Staples, Ticketmaster and Uber.
How does Apple Pay make money?
Apple has struck deals with the big US banks including JP Morgan Chase & Co, Citigroup and Bank of America as well as Visa, MasterCard and American Express. It collects a fee for every transaction carried out via Apple Pay. Similar arrangements have been made in the UK. Users themselves are not charged for transactions.
What about the competition, then?
Some contactless services have been around for a while, such as Transport for London’s Oyster card. Of the mobile contactless services, PayPal is one of the most impressive – the company tested a system allowing customers to pay for goods using a phone and, this summer, it is rolling out a tap-and-pay app called PayPal Here (www.paypal.com/here) for the iPhone 6 and Android. Mobile operator EE has Cash on Tap, a topup app for Android devices that only requires an NFC-enabled SIM (bit.ly/eecash371). Vodafone customers will also soon be able to pay via phones at contactless terminals using Vodafone Wallet, which stores an alias of your bank card on the SIM and works in conjunction with Visa.
And what about Microsoft and Google?
Google Wallet has been available for a while, but it hasn’t yet launched a tap-topay app in the UK. Samsung has announced Samsung Pay, which works with a Galaxy S6 and Galaxy S6 edge.
In contrast, Microsoft is proving rather slow on the uptake. It has mentioned Windows 10 devices supporting Host Card Emulation, which allows credit card data to be transmitted securely, but there have been no ‘Windows Pay’ announcements so far.
FOUR WAYS TO PAY WITHOUT CONTACT
Use a contactless credit card
Contactless credit and debit cards contain a special chip and an antenna that is able to beam a weak radio wave to a receiving payment reader. Look for the symbol of four curved lines to see if your card is compatible.
Add a special sticker to your phone
Many financial companies including Barclaycard PayTag (bit.ly/barclay371) have gone down the route of offering mobile-phone cases and stickers that contain the necessary tech needed to make contactless purchases without digging into a wallet.
Set up a digital wallet
Services such as PayPal, Barclays Pingit and Zapp (used by First Direct, HSBC, Nationwide, Santander and Metro Bank) let you pay friends and businesses over the internet. However, they cannot be used at the contactless points in retail outlets.
Sign up to a contactless mobile service
It won’t be long before Apple Pay and its rivals come on board in the UK. Just make sure your phone or smartwatch is fully charged, then you can pay and manage your money with ease.