With the new announcement, Apple attempts to succeed where other mobile payment systems have quietly under performed, payment systems like Google Wallet and Softcard. Apple Pay will use near-field communication (NFC) to process the mobile payment. A customer can simply wave their mobile phone in front of a retail terminal and press their thumbprint on Apple’s iPhone thumbprint reader to confirm the transaction and pay. Apple Pay stores a unique device-only code for payments. Payments can be suspended if the phone is lost or stolen. Apple does not collect any transaction data from the retailer or the customer. The feature accepts major credit cards, MasterCard, Visa, and American Express.

Already over 20,000 retailers have announced they would accept the payment, including Whole Foods, Target, and Macy’s. With recent news about online security breaches resulting in scandals like celebrity nude photo leaks from iCloud and credit card hacks at major retailers like Home Depot and Target, it will be interesting to see if Apple Pay will enjoy widespread adoption with its promise of increased security. Mobile payments are seeing rapid growth outside of the U.S.; over 20% of MasterCard’s transactions in Canada are touch-to-pay. Apple’s foray into mobile payments could shake the retail and finance industries, introducing entirely newer and more secure methods of payment. The credit card with its magnetic strip is looking outdated!

With Apple Pay, a Push Into Mobile Payments

By Mike Issac, NY Times

Tech evangelists have predicted for years a world in which people paid for retail goods with the wave of a smartphone, or the push of a smartphone button. For nearly as long, this so-called mobile wallet has yet to catch on.

Now, the biggest technology player of them all — Apple — thinks it has the formula for making it happen.

On Tuesday, Apple announced that it planned to offer its own version of a mobile wallet, teaming up with retailers like Target and restaurants like McDonald’s, as well as the three major credit card companies. That means that consumers will soon be able to buy a Big Mac or a laundry detergent with the tap of a new Apple iPhone or a new smartwatch, also announced on Tuesday.

The product, Apple Pay, will almost certainly give Apple a leg up on mobile payments, which Forrester Research expects to reach $100 billion in the United States over the next five years. But it remains to be seen whether people are ready to turn their paying over to a digital device, and whether Apple will be able to keep the edge for long.

Apple’s solution, waving the phone, is little different from previous efforts. But Apple hopes that its promises about security, including that credit card information will not be stored on the smartphones or devices or on Apple’s servers, will convince consumers that it is safer than using a credit card. “We’re totally reliant on the exposed numbers and the outdated and vulnerable mag stripe,” said Timothy D. Cook, Apple’s chief executive, at an event in Cupertino, Calif., on Tuesday. “Which all of us know aren’t so secure.”

The timing may be right, too. Merchants are up against a mandate to swap out their payment terminal infrastructure to accept a more secure chip form of transaction by the end of next year. If enough people want to use Apple Pay, merchants could have the incentive to install hardware to process mobile transactions, long one of the hurdles to the rise of paying with phones.

Mr. Cook said that Apple Pay would be available only on the company’s two new smartphones, the iPhone 6 and the larger iPhone 6 Plus, and the Apple Watch, a wearable computing device Apple plans to sell in 2015.

But the move has implications far beyond Apple and those devices. If Apple Pay can make more people use their smartphones to pay for things, it could push companies like Google, Amazon and Microsoft to reach similar deals with retailers and credit card companies, making mobile payments more widespread.

“Lots of companies have tried this before, but our security and the Apple payment experience will be the two biggest drivers here,” said Charles W. Scharf, chief executive of Visa, which is teaming with Apple in the initiative, as are MasterCard and American Express.

Apple Pay fits into Apple’s existing Passbook app, which allows users to store coupons, tickets and merchant loyalty cards digitally. Using a stored credit card, customers wave their phone in front of a terminal to pay. The payment is delivered to the terminal using a technology called near-field communication, or N.F.C., via a chip embedded in Apple’s new iPhones.

Tens of thousands of retailers in the United States, including Whole Foods Market and Macy’s, will accept it. And because of a partnership with Stripe, a payments processing start-up, Apple Pay can help small app developers use the service to power their transactions.

Other major tech companies have tried mobile wallets and struggled. Google, for example, introduced its wallet product, which also uses N.F.C. technology, in 2011. And a consortium of American mobile carriers have backed Softcard, another app-based smartphone wallet.

Both options have been hamstrung by complications. Google Wallet worked only on specific phones, using specific cellular networks, and with specific credit card issuers. And paying with a phone has been no easier or more valuable than swiping a credit card at the register.

“The mistake that many wallet providers have made in the past is focusing too much on technology and not on the value for the customer,” said Denée Carrington, an analyst with Forrester Research. “The consumer doesn’t care if it’s N.F.C. or a bar code. They just want to get through the line quickly and easily.”

But privacy and security have been major concerns as well. Recent hacker attacks of Target and Home Depot, among other retailers, have exposed the data of millions of consumers. And even Apple has had problems with the security of its iCloud storage system; celebrities whose individual accounts were hacked recently saw their private nude photos spread across the Internet.

Tom Pageler, the chief information security officer at DocuSign, a company that manages digital transactions, said that Apple’s payment system seemed to be more secure than the current system. He said the N.F.C. technology would also help payment companies identify unusual purchases; using smartphone data, they will be more easily able to identify a purchase made outside a customer’s usual location, for example.

Still, even if Apple’s new product increases consumers’ appetites for mobile wallet, merchants will need to take part.

“The onus is on retailers to drive mobile payment adoption,” said Josh Beck, a research analyst with Pacific Crest Securities. “Brick and mortar sales are challenged. If Apple and others can pitch a real value proposition for merchants, then you could see the retailers push mobile payments in their stores.”

That value is not clear today. But in the future, mobile wallet providers could make it more attractive for merchants and customers, perhaps pairing special offers, discounts or loyalty coupons.

And for now, at least, analysts believe if there is any company to persuade consumers of the mobile wallet’s value, it is Apple.

“Apple is likely able to create a sort of harmonious ecosystem that Google wasn’t able to do,” said Ms. Carrington of Forrester.