On September 9, Apple made its big reveal for this year’s iGadgets: the iPhone6 and iPhone6 Plus, the $350 iWatch and something called Apple Pay, a mobile wallet system. If mobile wallets already seem familiar, it may be because you’re one of the relatively few people using Google Wallet or Softcard (originally called Isis), both of which have been around for years.
Related article: Everything You Need to Know about Apple Pay
In fact, Apple Pay is late to the table, entering a crowded, if somewhat unspectacular field, at least as far as user adoption is concerned. But Apple Pay’s distinctive features lead some commentators to label it a game-changer. As some say, Apple Pay could finally make mobile payments happen.
The technology that powers mobile wallets is called near-field communication, abbreviated as NFC. Basically, NFC involves smart chips and waving, rather than magnetic strips and swiping. NFC incorporates radio-frequency identification (RFID) signals to transmit limited amounts of data from one device to a receptor located a few inches away. If you have a Passbook or a Starbucks app on your Smartphone or tablet, you may already be using NFC technology. (Tech Radar)
Americans have been hesitant to embrace mobile payments. One reason: security, named by 46 percent of respondents to a Thrive survey as a reason for not using mobile wallet systems. All three mobile wallet systems use NFC and RFID technology. (Cornerstone)
Softcard, developed through collaboration between AT&T, T-Mobile, and Verizon uses a PIN to enhance security. It uses a “secure element” (SE), a piece of hardware that stores encrypted financial information. The merchant doesn’t see your financial info–no numbers, names, nothing. It is isolated from your phone’s hardware and OS, and if your phone is lost or stolen, you can disable the app remotely.
Google Wallet did originally use a secure element but soon found itself in a battle with carriers like Verizon who blocked access to it. Google ended support for physical secure elements in 2014 to instead use host card emulation (HCE), an allegedly less secure software solution. Like Softcard, Google Wallet uses a PIN to authenticate transactions. The app can be disabled remotely from the Wallet website.
Apple Pay incorporates a hardware secure element like Softcard, but instead of entering a PIN code, Apple Pay uses the TouchID system which reads your fingerprint to authenticate transactions. Apple Pay creates a one-time transaction code that encrypts your data. The merchant also never sees any of your financial information. If you lose your iPhone, you can suspend all Apple Pay transactions through the Find My iPhone app without canceling your credit cards.
All three of these tools have similar security features, so who stands out? Because Apple Pay is touch-activated, there’s no need to open an app, enter a PIN, and navigate to a card or coupon. You don’t even need to wake your display, just hold your iPhone near the contactless reader. Convenience aside, its a lot easier to commit fraud if you know someone’s pin than it is to use their fingerprint when buying something.
Apple Pay and Softcard use a hardware secure element to store transactions which is an advantage over Google Wallet’s host card emulation strategy. Also, many believe that the iPhone or iWatch will be more secure because Apple produces Apple phones and all the hardware within, unlike Android’s many producers like HTC and Samsung.
Security: Advantage Apple Pay
ApplePay has partnered with American Express®, Mastercard and other financial institutions to create locally-stored digital versions of a customer’s debit and credit cards, potentially eliminating the need to carry ANY cards.
Adding individual cards to Apple Pay is dead simple: snap a photo of your card with your iPhone iSight camera and it gets added to your Passbook automatically as your default card – possibly using Optical Character Recognition technology (no confirmation yet on this). You could also type in the card information if you prefer that way – and it gets stored in your Passbook. Additionally, if you wanted to use the Credit card already set up in your iTunes account, you can add it to Passbook by simply entering the card security code. At any time though, you can change your payment preferences & card used via Passbook.
In normal transactions, every time you hand over your credit or debit card to pay, your card number and identity are visible to the cashier. But with Apple Pay, instead of using your actual credit and debit card numbers, a unique Device Account Number is assigned, encrypted and securely stored in the Secure Element, a dedicated chip in iPhone. These numbers are never stored on Apple servers. And when you make a purchase, the Device Account Number alongside a transaction-specific dynamic security code is used to process your payment. So your actual credit or debit card numbers are never shared with merchants or transmitted with payment.
With Google Wallet and Softcard, on the other hand, the setup process takes more time and involves several steps, even though the process is similar. Once signed in to your Google account, you must enter your personal and billing information and save it, then visit a separate website to continue the process. There, you have to put in more information, before downloading the app to complete sign up. Thankfully, Google Wallet also lets you snap a photo of your card to add it (pretty much like Apple Pay), but Softcard lags here. Only once you’ve set up a PIN number can you begin adding specific credit cards to the app itself… via the financial institution’s website.
So, even though Google Wallet and Apple Pay require you to store your credit card information somewhere (iTunes or Passbook in Apple’s case and Google Account in Wallet) Apple Pay appears to be more secure with transactions as your purchases are kept “private”. Apple doesn’t store the details of your transactions so they can’t be tied back to you. Your most recent purchases are kept in Passbook for your convenience, but that’s as far as it goes. On Google Wallet, even though your original credit/debit is not shown to the merchant, a temporary “virtual card” is shown to the merchant. Slight edge for Apple Pay here.
Also, since you never have to show your credit or debit card at the point of purchase, you never reveal your name, card number, or security code to anyone. This is a huge plus for many folks who’re concerned about privacy.
Enabled by TouchID, Apple Pay’s user experience is seamless and secure. iPhone 6 will recognize and authenticate you based on your fingerprint at any point of sale purchase, where you can just place your finger on the Touch ID sensor with your iPhone near the contactless reader, and your payment will be sent. Even with payments within apps that accept Apple Pay, one touch is all it takes to authenticate, verify and make payment. This is as simple as it can get.
User Experience: Advantage Apple Pay
Apple announced that it has also teamed up with high powered merchants, including Subway, Disney, Walgreens, Macy’s, Sephora, Whole Foods, McDonald’s and (duh) Apple Stores. Shop at any of these establishments, and pay for your purchases directly through ApplePay – no credit cards or PIN required.
Softcard hasn’t done too badly in signing merchants, inking deals with heavyweights like Aeropostale, Toys R US, Coca Cola, and mobile carriers like AT&T. Google Wallet has lagged in this area, not least because years ago T-Mobile and Verizon blocked the app on their phones in favor of Softcard years ago.
Although all of the players have announced support from some big-name retailers, it’s ultimately a win for everyone. None of these retailers are using any proprietary point of sale technology that only supports one of these services. They are all using card readers made by companies like Verifone that adopt NFC as a standard. The technology is the same and open to everyone. The more retailers that get on-board with NFC, the more it drives forward NFC for everyone.
Merchant Availability: Advantage – It’s a win for everyone
With all the advantages of Apple Pay, it would seem inevitable that Apple would eventually take over the mobile wallet market. But that conclusion discounts the overwhelming advantage of Android (and potentially, Google Wallet and Softcard) in the mobile market.
Many of Apple’s own devices lack the necessary hardware to run Apple Pay or any NFC mobile wallet for that matter. This includes the iPhone 5 and the still-new iPhone 5C and iPhone 5S, and all versions of the iPad – never mind the iPhone4S or even older models. That leaves the vast majority of mobile devices without Apple Pay functionality. It also forces current users, who have probably purchased the iPhone 5S or 5C less than a year ago to upgrade if they want the technology.
Android has been in the mobile payment market for a long time, and the list of NFC capable devices is ever-growing. Many current Android users have the option to simply trade out their current SIM card for an enhanced, NFC capable one (if they don’t have one already). So although iPhone users have to wait a little bit longer, most Android users can try out tap-and-pay right now.
Compatibility: Advantage Google Wallet and Softcard
Still, Nothing Can Replace Your Wallet Entirely
There is the small matter of how to use mobile payments if your smartphone battery dies. What if you drop your smartphone and smash it to bits? And while you can wipe your device if it is lost or stolen, that also pretty much wipes out your mobile payment system too – at least until you install everything on a new device.
To be fair, all mobile wallets share these latter weaknesses. There’s no true winner here, besides a real, live wallet.
Who Wins? Apple Pay
They all generally do the same thing and use similar technology, but because of Apple Pay’s superior security and user experience, we have to call it the winner. If by the end of this year, the convenience of mobile payments finally becomes a “thing” for the masses, it’ll most likely be because Apple Pay made it so.
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Audrey Henderson is a Chicagoland-based writer and researcher. She holds advanced degrees in sociology and law from Northwestern University. Her writing specialties are sustainable development in the built environment, policy related to arts and popular culture, socially and ecologically responsible travel, civic tech and personal finance.