Market Insight

Will Apple Pay Help Drive NFC Payments from Geek Street to Main Street?

September 12, 2014

Don Tait Don Tait Principal Analyst, Cybersecurity & Digital ID

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As announced on Tuesday, Apple’s iPhone 6 and iPhone 6 Plus and the Apple Watch will all contain NFC technology. Shipments of NFC-enabled handset are projected to increase to 430 million in 2014, up from 275 million in 2013, according to latest research from IHS Technology (NYSE:IHS).

IHS Inc Image - World Shipments of NFC-enabled Cellular Handsets











Apple Pay – Key Points

  • Apple Pay will initially only available in the US and start in October 2014.
  • Apple Pay will reside in the existing Passbook wallet app. It will use Touch ID finger verification, tokenization and an embedded secure element.
  • When customers add a credit or debit card with Apple Pay, the actual card numbers are not stored on the device or on Apple servers. Instead, a unique Device Account Number (DAN) is assigned, encrypted and securely stored in the secure element on the iPhone or Apple Watch. Each transaction is authorized with a one-time unique number using your DAN and instead of using the security code on the back of your card. Apple Pay creates a dynamic security code to securely validate each transaction.
  • Apple will not collect customers’ purchase history. 
  • Apple Pay will support credit and debit cards from the three major payment networks, American Express, MasterCard and Visa, issued by banks including Bank of America, Capital One Bank, Chase Citi and Wells Fargo.
  • Leading retailers that will support Apple Pay include Bloomingdale, Disney Store, Walt Disney World Resort, Duane Reade Macy’s, McDonalds’s, Sephora, Staples, Subway, Walgreen and Whole Foods Market. It will also be available in Apple retail stores across the U.S.
  • Apple Pay will also work on the Apple Watch and will extend Apple Pay to over 200 million owners of iPhone5, iPhone 5C and iPhone 5S globally.


IHS Take on Apple Pay

  • The launch of Apple Pay will undoubtedly help the drive towards NFC payment and mobile payments in the US.
  • This represents a shot in the arm for NFC ecosystem as a whole and NFC payments in particular.
  • It could represent a threat to other mobile wallets in the US including Google Wallet and Softcard (formerly called ISIS).
  • It is also worth pointing out that there is a long way to go before NFC payments and mobile payments enter the mass market. Customers will be able to use Apple Pay in approximately 22,000 merchant locations across the U.S. that have contactless payment enabled. This represents a good starting point but is still a drop in the ocean compared to the 9 million or so merchant locations in the United States.
  • Any new payment system that is launched onto the market needs to take into account the high security and privacy concerns of consumers. This is particularly important in light of the security breaches at Target, Neiman Marcus and recently Home Depot.
  • There is an impressive list of retailers who are already supporting Apple Pay. This will undoubtedly grow!
  • It will also help the U.S. migration to the Europay, MasterCard and Visa (EMV) standard, which is starting to ramp-up.
  • Any retailer in the United States that is not already working on EMV migration is more likely to replace their old point of sale (POS) terminals with EMV contactless and NFC compliant terminals in light of Apple’s announcements.


In summary, Apple's announcement of incorporating NFC into its latest iPhones and Apple Watch is certainly a good start in helping drive NFC payments from geek street to main street!

Feel free to contact me regarding this Insight.

Kind regards, Don

T: +44 1933 402 255


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