Aug 19, 2019 | Updated: 08:55 AM EDT

Apple Pay Launches This Week [Video]

Oct 20, 2014 04:41 PM EDT

Apple Pay Launches: What are its Limitations?
(Photo : Apple)

Apple launched it's mobile payment system today that will allow users of certain iOS devices to make payments at participating retail locations using nothing more than their iPhone (or eventually, their Apple Watch). It's a system intended to reduce the need to carry physical credit cards and other traditional forms of payment in a push by Apple to become the wallet of the future for many. Will it catch on? That remains to be seen, however, Apple has made numerous partnerships with retailers in order to help guarantee the success of Apple Pay, but only time will tell if people are ready and willing to buy in.


Apple claims that Apple Pay will allow users to complete transactions at over 220,000 retail locations or within compatible apps by authenticating said transactions using their finger or thumbprint. 


While Apple's partnerships with retailers (including McDonalds, Whole Foods and Walgreens, to name just a few) are indeed impressive, they're far from complete. Retail giant Wal-Mart is one of the most notable holdouts, and it is unclear if or when they will sign on to support Apple Pay. Another limitation is that Apple Pay currently will only work with the iPhone 6 and iPhone 6 Plus, Apple's newest and most expensive phones. 

Another current limitation is that pre-paid cards and corporate credit cards are not supported, and neither are proprietary credit cards, like those from Macy's. This news is significant because, according to a Macy's spokesperson, the retailer generates nearly half of its income from Macy's cards. Benefits from these proprietary store cards also include special discounts and loyalty programs. Merchants themselves also are missing out as they typically collect around 4% per transaction on these cards. 


Apple expects these major issues will all be solved in time as retailers slowly adopt terminals that support Near Field Communication, the technology Apple Pay employs to complete mobile transactions. Apple claims that security will be their biggest selling point, and it's a relevant one given that large retailers like Target and Home Depot experience huge beaches in customer credit card data over the past year. Apple Pay actually uses a one-time encryption for each transaction, an added feature they claim should avoid such breaches in the future. 

Apple will not be alone for long in the mobile payment space, however. Google already launched Google Wallet in 2011, an app that also uses NFC and allows users to store their cards on their phones and make mobile transactions--though Google Wallet never really gained wide adoption by smartphone users. Softcard is another alternative to Apple Pay that should be launching soon. It is a joint venture by U.S. carriers T-Mobile, Verizon and AT&T and also uses NFC technology.

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