Apple Pay Q&A: What You Need to Know

Apple
AP

CUPERTINO, Calif. (AP) - Apple's mobile payment system, Apple Pay, made its debut Monday. Now you can flash your new iPhone in the checkout line to pay for food, clothing and other goods. There's no need to pull out your credit card.

You'll also need a credit card that works with Apple Pay. Major credit card issuers such as American Express, Bank of America, Capital One, Chase, Citibank and Wells Fargo are backing Apple Pay. Apple says more than 500 banks are participating, representing about 83 percent of the card volume in the U.S.

To get started, use the Passbook app or go to "Passbook & Apple Pay'' in the settings.

Q. Is it secure?

A. Although security measures are never foolproof, the Apple Pay system is safer than many current pay methods.

For one thing, a substitute account number is assigned when you set up Apple Pay. Merchants get that instead of your real card number. In addition, a verification code is created for each transaction, based in part on unique keys on the phone. Even if hackers get that substitute number, they wouldn't be able to generate the verification code without having possession of your phone, so fraudulent transactions would be declined.

A few dozen chains, including Macy's, McDonald's, Subway and Whole Foods, are expected to accept Apple Pay right away, though some of their stores might not be ready yet. Other retailers expected to do so by the end of the year include Staples, Urban Outfitters and Walt Disney Parks and Resorts.

Apple is distributing logos to merchants that accept Apple Pay, similar to symbols for Visa and MasterCard, though the lack of a logo doesn't necessarily mean Apple Pay isn't accepted.

In addition, you can use Apple Pay to make online purchases within apps, without having to enter card numbers, billing addresses and other information. It's up to merchants to enable this with app updates. Groupon, OpenTable, Staples and Target are among the initial ones to do so. You'll see a button for "Apple Pay'' or "Buy with Apple Pay.'' The new iPads will be able to make in-app payments, but they lack NFC chips for in-store payments.

Q. What about smaller merchants?

A. Dry cleaners, local restaurants and other smaller businesses are less likely to have the equipment ready. All told, there are more than 200,000 payment terminals in the U.S. capable of making "contactless'' transactions, but that's out of several million.

Even though relatively few small merchants can now accept NFC payments such as Apple Pay, that's bound to change in a year when the EMV deadline comes.

Q. Do I have to pay to use it?

A. Apple hasn't said much about how it plans to make money from Apple Pay transactions, but it's safe to say that credit card companies would be the ones covering any fees. Card companies might factor in those costs in the regular fees that consumers and merchants pay. However, those companies might be able to use savings from fraud reduction to cover any Apple Pay costs.

Copyright AP - Associated Press
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