Mobile payment options are nothing new. There already exist a number of in-phone Apps that allow customers to shop online and at retail stores around the world. And both Amazon and Google have launched their own proprietary mobile payment platforms.
So why has the arrival of Apple Pay excited merchants, consumers and credit card issuers alike?
Whereas previous mobile payment technologies have only enjoyed limited success, Apple's foray into the market could be a game changer:
- The company already has more than 800 million iTunes users with pre-registered credit cards and email accounts.
- Apple has already secured mobile payment agreements with more than 220,000 restaurants and retailers, including Macy's, Subway, Target and McDonald's.
If your retail store isn't already equipped to accept Apple Pay, you could be missing out on a huge business opportunity.
But as a merchant, how do you actually integrate Apple Pay into your existing payment infrastructure?
Making Apple Pay Work for Your Business
Before getting started, it’s important that you understand how the technology works.
After purchasing an iPhone 6 (normal or Plus) or the Apple Watch, customers load their credit card details into their devices. Thereafter, Apple Pay creates a tokenized account number that replaces the card's 16-digit number. Customers can then use their devices to make purchases (on their side).
On the merchant side, there are two important implementation steps:
- You must have a merchant account. If your store currently accepts credit or debit cards, you already have an account.
- You must invest in a near field communication (NFC) credit card terminal that can accept contactless payments (NFC is a wireless technology that closely resembles Bluetooth — except that data transfers happen more securely and over much shorter distances).
After installing NFC terminals (and logos) in your store, you’re ready to begin processing Apple Pay transactions. The following shows how a standard purchase happens:
- When a customer is ready to buy at your cashier counter, she waves her Apple device across your NFC terminal (in lieu of swiping a traditional credit card).
- Next, the shopper will authorize the purchase — either with a PIN code or with Apple's TouchID technology.
- The Apple device sends both a unique dynamic security code and the device's account number wirelessly to your NFC terminal.
- This information gets transmitted to your payment processor, where the codes become "de-tokenized" and the card issuer authorizes payment.
- Purchase confirmations get sent back down the chain to your NFC terminal and the customer's Apple device.
As you can see, credit card information never gets captured — either on the Apple phone or on your contactless payment terminal. Using Apple Pay's secure technology helps lower your PCI scope, thus reducing the risk of paying merchant-side penalties for credit card fraud.
As an added benefit, neither you nor your customers have to pay for using Apple's technology. The card issuers pick up the tab — usually 0.15 percent per transaction.