And leave the credit cards behind!


The holidays are officially in full swing. The malls may be packed, but this year shoppers are keeping their credit cards in their wallets – thanks to a little app known as Apple Pay. Yes, the technology powerhouse has done it again, and the app is getting some serious traction. So let’s get down to brass tacks: What exactly is it? Is your information secure? How does it work?

Here are the basics: Apple Pay was released to the public through an update to iOS 8.1 on October 20. Apple Pay is designed to allow iPhone 6 users to pay for goods and services with their iPhones using an NFC chip built into the iPhone 6, 6 Plus and Apple Watch (Apple Watch will be released in early 2015). The retailer must have an NFC compatible pay station, or terminal. The user’s credit cards are securely added to the Passbook application. Once the card is added, Apple Pay is ready for use. One simple touch of the home button, held over the NFC terminal, and the transaction is complete.

Of course there are some nervous nellies out there, and understandably so. In the wake of the SnapChat photo storage debacle, can we ever really trust our personal information is safe? Apparently so. Apple Pay is claimed to be the most secure payment scheme on the planet by credit card executives. When a credit or debit card is scanned for use with Apple Pay, it is assigned a unique Device Account Number, or “token,” which is stored in the phone rather than an actual card number. Credit card numbers and data are never uploaded to iCloud or Apple’s servers. When a transaction is made, the Device Account Number is sent via NFC, along with a one-time security code unique to each transaction, both of which are used to verify a successful payment.

In the Know-Get Ready to Holiday Shop-apple-payThe new payment framework is called “tokenization” and it is believed to be the new gold standard in secure payment transactions. Retail hacking incidents resulting from stolen user data will be prevented, as retailers will never encounter actual credit or debit card numbers. For us attorneys, a sincere reduction of fraud claims is on the horizon.

Apple Pay does have a competitor, CurrentC, a mobile payment system backed by MCX, or Merchant Customer Exchange. CurrentC provides technology to older phones and does not charge a fee for use (Apple Pay charges a nominal fee), but the buck stops there. Before MCX officially released CurrentC, a security breach was reported and customers’ email addresses were hacked. What’s more is MCX has required merchants to sign exclusivity agreement, preventing them from using Apple Pay. As a result, retailers such as CVS and Rite Aid have disabled NFC technologies in their stores, which has, of course, launched a class action lawsuit investigation focused on antitrust regulation violations. The overwhelming majority of consumers seem to disfavor CurrentC as it does not encrypt user information, is clunky to use, and tracks and stores user health data, a potential serious privacy violation. Understanding the way these technologies work is truly the key to properly selecting which mobile payment method you prefer.

The news on this technology is mounting as fast as Apple’s stock prices, so tune in. Tis’ the season to download the latest mobile payment system and cut up those cards for good, because plastic is so 2014…

Vanessa Braeley, Associate Attorney with NeJame Law, contributed to this article.