Apple launches an ambitious new mobile service, Apple Pay, which aims to change the way consumers pay for goods and services, doing away with cash and traditional credit cards. Jeanne Yurman reports.
Apple's new ambitious mobile payment service, Apple Pay has gone live. The tech giant is gambling that Apple Pay's ease and added security will convince shoppers to ditch cash and traditional credit cards. Users can enter their payment-card information on new Apple iPhone or soon-to-be-released tablets and smartwatches and buy things by simply holding the device up to readers installed by store merchants. Addressing security concerns, card information is converted into a token -sort of an alias for the credit card number - and stored on a chip - not on Apple's servers. Rather than trying to create a payment ecosystem from scratch, Apple is drawing on the 800 million Apple users already connected with credit and debit cards to iTunes accounts who also will be able to make one-click payments with Apple Pay online. Morningstar analyst, Brian Colello, says this won't be a big money maker at first. Rather it pumps up customer loyalty for Apple's devices. SOUNDBITE: BRIAN COLELLO, EQUITY ANALYST, MORNINGSTAR (English) SAYING: "It makes people less likely to switch away from the IPhone to buy the Android devices. So they are less likely to move to a Samsung phone because of a shinier screen - so save $100 here for there. You know Apple Pay should help create customer stickiness. We think it's a very hard service to replicate." And Apple has teamed up with existing businesses including six of the major card issuers, which handle over 80 percent of credit card volume, three major card processors, American Express, Visa and Mastercard and 500 banks nationwide. It works at over 220,000 locations at major names like Macy's, Whole Foods, Mc Donald's and Walgreens. While card companies may make a smaller percentage per transaction with Apple, they have signed up en masse, not wanting to be left out and figuring volume will make up the difference in commissions. Mastercard's James Anderson. SOUNDBITE: JAMES ANDERSON, SENIOR V.P., EMERGING PAYMENTS, MASTERCARD (English) SAYING: "Once we established that the visions were compatible, yeah we wanted to be part of it. I think it would be a very brave company that decided that they wanted to bet against Apple in consumer-facing services." Analysts say most at risk with Apple Pay's arrival are mid-size mobile payments suppliers but also eBay's larger PayPal should give pause. Apple has yet to sign on the world's biggest retailer, Walmart, which could certainly grow Apple Pay's user base. But it and Best Buy are sticking to a rival mobile payment service that is Android-based.