A new contactless payment system that lets people use their iPhones to tap-and-pay in high street shops has been launched in the UK. Apple Pay will let iPhone 6, 6 Plus and Apple Watch owners pay for items costing up to £20 by just touching their gadgets to a payment terminal, much like contactless credit cards.
The UK launch marks the first expansion of Apple’s contactless payment system beyond the US, where it rolled out last October. Contactless payments have become increasingly popular in the UK with major banks offering cards that can just be tapped to pay, eliminating the need to type in a pin.
Apple will hope its system proves popular by reducing the number of items people need to carry, and by offering the extra security of using fingerprint recognition.
How does it work?
Apple Pay is effectively a digital wallet. It lets users use their credit and debit cards through Apple’s Passbook app. There are two ways to use it: in a physical high street store and online.
Only people with the latest generation of iPhones, or an Apple Watch, will be able to use it in stores. Apple Pay uses near-field communications (NFC) found in the iPhone 6, 6 Plus or Apple Watch in a similar manner to contactless cards.
Unlike contactless cards, Apple Pay includes an extra security measure known as tokenisation, which ensures that the card details stored on a phone are never passed to the retailer. Instead, the payee receives a one-use “token” allowing them to debit the payment only once.
The payments are secured and verified by the owner’s fingerprint using Apple’s Touch ID system. This might make it slower sometimes when authentication is required compared to using a contactless card but the security-conscious may appreciate the extra check.
Which cards can I use?
The first wave of banks to support the payment system in the UK include First Direct, HSBC, NatWest, Nationwide Building Society, Royal Bank of Scotland, Santander and Ulster Bank. Apple promises a second wave by the autumn, including Bank of Scotland, Coutts, Halifax, Lloyds Bank, MBNA, M&S Bank and TSB Bank.
A notable absentee is Barclays, which is apparently still working some things out, likely around Apple’s cut of each transaction.
Where can I use it?
A variety of banks, credit card companies and retailers have lined up to support Apple Pay. Most retailers that already accept contactless payments via credit and debit cards will support the new pay system.
Notable companies and services include Nandos, McDonald’s Wagamama, Boots, several supermarkets, BP, Starbucks, the Trainline and Transport for London for train, bus and tube journeys.
For online payments the list includes Addison Lee, Argos, British Airways, Domino’s, easyJet, Hailo, hungryhouse, Just Eat, lastminute.com, Miss Selfridge, Ocado, Topshop and Zara.
When used to pay online, Apple Pay will operate similar to the way PayPal works on Samsung smartphones, using a fingerprint to authenticate payments without having to enter credit card details on supporting sites.
Is there a limit?
Most payments will be limited to the £20 cap that is currently in force for contactless payments using credit or debit cards. That limit will rise to £30 in September.
But Apple Pay will be able to support larger payment amounts using updated terminals in shops that verify the user’s payment credentials using Touch ID instead of having to enter a pin.
How quickly support for larger payments rolls out has yet to be confirmed.
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What’s the competition doing?
Unlike the US, the UK has had robust support for contactless payments through credit and debit cards. Contactless payments were up 255% in 2014, while 58m contactless cards were in circulation.
Companies such as PayPal, services operated through mobile phone operators such as EE’s Cash on Tap and smartphone manufacturers such as Samsung and Google also have their own payment solutions, but have struggled to gain traction.
The launch of Apple Pay is likely to improve support and awareness of smartphone payments, but whether users will be convinced to pull out their smartphone instead of their credit card remains to be seen.
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