What is Apple Pay and How Does it Work?

Is This The Right Mobile Payment App for You?

In today's increasingly digitized world, where mobile shopping is the norm, we’re spoiled for payment options.

Apps like Apple Pay and Google Pay provide more freedom than ever before, allowing us to ditch the wallet and even our debit and credit cards!

After all, most of us have our phones on us at all times, making mobile payments a quick and convenient way of processing transactions. To make a payment with Apple Pay, you just need a compatible device connected via near field communication (NFC) – simple, right?

Apple Pay presents a convenient digital wallet that can be used for contactless payments in-store, in-app, or online purchases. You can even send money to family and friends via a simple message!

In light of all that, today, we’re uncovering everything there is to know about Apple Pay. Hopefully, by the end of this blog post, you’ll be better positioned to decide whether this service is right for you.

There's lots to cover, so let's dive straight in!

What is Apple Pay? The Basics

What is Apple Pay

Apple Pay became available in 2014 and was designed to work with iPhones going forward from that year. Nowadays, it also works alongside Apple Watches. Generally speaking, the service is available for iOS devices running on iOS 10 or later, which applies to iPhones starting from the iPhone 6.

You can also use Apple Pay with iPads; however, this isn't always convenient for in-store purchases. However, it's only compatible with iPads with Touch IDs like the iPad mini 3, iPad mini 4, iPad Air 2, and iPad Pro.

According to Statista, Apple Pay enjoyed over 507 million users in 2020. Experts also predict the service to account for 10% of global card transactions by 2025. And so, for merchants not already offering Apple Pay as a payment method, this might be worth considering.

As you probably already know, Apple Pay is Apple’s mobile payment service. It’s an effortless way of making secure, contactless payments using just your phone. The transaction is supported via an NFC connection.

The benefits of Apple Pay are plain. It primarily provides more flexibility to consumers who prefer not carrying a wallet or physical cards like a visa or MasterCard. You don’t have to remember credit card numbers; you just need your phone handy whenever you want to make a payment.

Apple Pay enables you to make one-tap purchases within apps with Apple Pay set up as a payment method. Since 2017, Apple Pay also supports person-to-person transfers through the iOS messaging app. You can also use Apple Cash to ping money over to family or friends in the US.

If you’re already an Apple Pay user, you can go one step further and get the Apple Card. This comes with unique benefits that offer deep integration with the wallet app and Apple Pay.

Thanks to Touch IDs and even Face ID, Apple Pay might even be a safer way to pay. For instance, if you lose your phone, strangers can't access your digital wallet. Unfortunately, the same can't be said of contactless cards.

Apple Pay's Pros and Cons

Avid iPhone users may find it very helpful to use Apple Pay for quick and simple transactions. It’s an excellent solution for anyone that doesn’t always carry their wallet around and wants to cut down on how many physical cards they have to keep on their person.

Apple Pay is widely accepted across the US and the rest of the world and doesn’t need downloading or installing from the get-go. It can also be used with Apple Watches for even more convenience.

In theory, there aren't any noticeable downsides to Apple Pay. That said, we've rounded up the main pros and cons to help you decide whether Apple Pay's the right mobile payment solution for you:

The Pros 👍

  • It's a quick and easy NFC payment system
  • Anonymous payments keep your data secure
  • You can use your Apple Wallet to manage gift cards, tickets, payment cards, and more.
  • Merchants can set themselves apart by accepting Apple Pay
  • You can pay friends and family or request money via the Messages app.

The Cons 👎

  • Only Apple devices support Apple Pay, whereas Google Pay, for example, works with all devices.
  • To pay friends and family, they also have to have an Apple device with Apple Pay.
  • Paying in-store using face recognition is reportedly harder than with Android devices.
  • Apple Pay still isn’t accepted by all retailers, so you'll likely still need to carry a wallet.

Apple Pay For Consumers: The Key Features

Setting up Apple Pay is easy. As a consumer, you just need to add your debit or credit cards to your Apple Wallet. You can also store digital credit cards, debit cards, ID cards, boarding passes, tickets (and more!) here too.

Rest assured, you can add credit and debit cards from nearly any US bank to your participating cards and activate their rewards and benefits. This includes Bank of America, Chase, Citi, American Express, Discover, Capital One, Barclaycard, etc.

Other key Apple Pay features for consumers include:

  • Quick, secure, and contactless payments in-store
  • It's accepted across 33 countries, including Japan, Australia, the US, etc.
  • One-tap in-app and app store purchases
  • You can pay for Apple Music, Apple News+, and Apple Arcade subscriptions.
  • You can upgrade your iCloud storage and other Apple Services with Apple Pay payments.
  • You can transfer money to friends and family via messenger. This works both with debit and Apple cash cards inside the Wallet app. This is as easy as tapping the Apple Pay button in the messenger app and entering the amount you want to send. Apple Pay then confirms your payment with your Face ID, Touch ID, or your security code! You’re also able to send requests for payments this way, making it easy for your friends to pay you back.
  • You can transfer your apple cash balance to your bank account.
  • Apple Pay is accepted on public transport in cities including Chicago, New York, Portland, Tokyo, Shanghai, Beijing, and London.
  • You can use Apple Pay in any store with an NFC-friendly POS.
  • There are multiple layers of security in place to prevent fraud.

Apple Pay is free to use. It doesn’t charge any fees in stores or restaurants. Just remember that merchants may choose to charge additional costs as a “card transaction fee.”

However, you will be charged a 3% fee if you transfer money to another person using a credit card in your Apple Wallet.

Apple Pay london travel

Apple Pay For Merchants: Its Key Features

Apple Pay is just as easy for merchants to use and the perfect solution to offering customers more flexibility and on-the-go solutions. Do you already accept credit and debit cards? Then there’s a good chance you can start using Apple Pay, too.

However, if you’re not accepting contactless payments at the moment, contact your point-of-sale provider to see if you can start accepting Apple Pay. You might need to ask them to enable this functionality for you.

Below we've listed some of the benefits merchants will enjoy when using Apple Pay:

  • Apple Pay is more secure than credit, debit, and prepaid cards.
  • You don’t receive sensitive card or account numbers
  • Apple Pay works with most payment providers and card issuers, including Visa, Mastercard, American Express, Discover, China UnionPay, and more
  • You can process returns as you would with a traditional card
  • You can accept Apple Pay payments via Business Chat
  • You can enable your rewards program to run alongside Apple Pay.
  • There aren't any additional fees for using Apple Pay!

How to Set Up Apple Pay As a Consumer

As we've already hinted at, your eligible iOS device will have the Apple Wallet pre-installed. Just launch the app and add your credit or debit cards. These can then be used with any contactless payment terminal or for online and in-app purchases. You can register up to 12 cards to your Apple Wallet. For security measures, your device will also need a passcode or optionally Face or Touch ID.

Using Apple Pay is as easy as using any contactless card. You simply hold your phone towards the card reader and wait for your card to be accepted. In some regions, if your transaction exceeds a certain amount, you may need to enter your pin or provide a signature. For online or in-app purchases, you just need a simple tap. No login details or pins required!

Apple Pay can be used anywhere the Apple pay mark, or contactless NFC symbol is present.

Apple Pay for business

How Does Apple Pay Work For Businesses?

By enabling Apple Pay for merchants, you can easily accept mobile payments from customers for your goods and services. Once Apple Pay is enabled on your end, customers can simply add their cards to their Apple Wallet and use them to make contactless or single-tap payments. This works wonders for speeding up the payment process both in-person and online.

When customers are making in-store payments, they need to wake their devices up first. They may also have to enter a pin or unlock their device if the transaction exceeds regional limits.

Once the transaction is complete, you’ll see payment confirmation on your terminal just as you would with a regular card payment. In-store Apple Pay transactions are treated as card-present transactions, so credit card transaction fees will be charged as usual.

If you’re already able to accept contactless payments, Apple Pay should be equipped with your POS. But if that’s not the case, or you’re unsure of your POS's capabilities, simply contact your provider.

To enable Apple Pay online, you need to create a merchant ID and a payment processing certificate, which is used to secure transaction data. On the other hand, your merchant apple ID identifies your business as a merchant that can accept payments. It never expires and can be used across multiple websites and apps.

Once you can accept Apple Pay, you can display the Apple Pay mark to let customers know you provide this flexible payment option. Apple enables you to order Apple Pay signage kits for your brick-and-mortar store. This includes countertop cards, decals and clings, window posters, and a guide for employee training.

Apple Pay Security

Thanks to Apple Pay's simple two-factor authentication, it's even safer to use than some physical cards. In-store, your money is secure with NFC technology that's designed to only work across short distances. If your iPhone detects a nearby NFC field, it should automatically present your default card.

Apple doesn’t store or access your original credit, debit, or prepaid card numbers. In fact, it doesn’t retain any transactional details that could be tied back to you. Your card information is further protected by iCloud security, which offers another layer of encryption.

Online, your payments are also secure. Apple Pay accepts your encrypted transaction and re-encrypts it with a specific key before the information continues to the payment processor. This ensures that only the relevant app can access your payment information and no one else.

If you lose your phone, you can suspend Apple Pay by placing your device in Lost Mode. This means you don’t have to cancel all your cards immediately. Instead, you can just re-enable Apple Pay when you find your device. You can also erase your device remotely or call your bank provider to suspend any cards from Apple Pay.

Apple Pay Rewards

Using Apple Pay alone doesn’t provide you with rewards. But you can still benefit from rewards cards you’ve signed up with your Apple Wallet. For example, if you use Apple Pay with the Apple Card, you benefit from 2% daily cashback. There aren't any restrictions as to how much cash back you can earn each day, and the money appears in your apple wallet – ready to use immediately. Not to mention, if you shop with Apple or their partnered merchants, you also get additional cashback.

Should You Use Apple Pay?

If you’re an Apple user, you already have the Apple Wallet on your device. So, we see no reason why you shouldn’t enable your favorite cards. While not every retailer offers Apple Pay, it's still a safe and convenient payment method to use when available.

Merchants definitely benefit from offering Apple Pay to the many consumers that favor this payment service. While it's a bit of a hassle to get your ID sorted out, it's easy afterward to use Apple Pay on your apps and website. In-store, you should already be able to use this service if you have an NFC-capable POS system. If not, you may need to think about upgrading.

Ultimately, Apple Pay is limited to Apple users, and likely won’t find many fans amongst anyone using other devices. There isn’t enough reason to switch to iOS for this mobile payment service, with flexible alternatives like Google Pay available on the market.

As always, the key to finding the best service for you is more research. Just make sure the mobile payment service you're considering is widely available in your area and provides the security you need.

Have you ever used Apple Pay before? Or are you considering one of its competitors like Venmo or Samsung Pay? Either way, let us know how you got on in the comments box below!

Rosie Greaves

Rosie Greaves is a professional content strategist who specializes in all things digital marketing, B2B, and lifestyle. In addition to e-commerce platforms, you can find her published on Reader's Digest, G2, and Judicious Inc. Check out her website Blog with Rosie for more information.