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Will 'Apple Pay' Tip the Scales on Mobile Payments? It's Complicated

The new iPhones and Apple Watch may be exciting, but Apple Pay could give the mobile payments world the nudge it needs to take off.

People may be ooh-ing and ahh-ing over the new iPhones and the Apple Watch, but one of the biggest changes to the mobile landscape may not be a piece of hardware at all — if it catches on. Apple Pay is the company's long-awaited entry into the mobile payments world, which in the U.S. is still struggling to get to its feet. Can Apple succeed where others have failed, or will we have forgotten all about this in a year or two?

Apple Pay works using near-field communication, or NFC, a form of short-range wireless that's new to iPhones (it's only on the iPhone 6 and 6 Plus) but well-established on other platforms. Just put your iPhone near an NFC-enabled point-of-service system and a scan of your thumbprint via the home button, and the transaction is done. Encryption keeps your personal and bank info away from prying eyes or trackers — even Apple itself. Samsung and others introduced similar systems years ago, but they never caught on, here in the U.S., at least.

"With Apple moving to NFC, nearly 100 percent of smartphone platforms will be NFC-enabled, making it the de facto contactless solution for physical world mobile payments," Thad Peterson, analyst at the Aite Group, wrote in an email to NBC News, "and that by itself is huge."

NFC lets two devices in close proximity trade information quickly and securely, be it phone numbers or payment instructions. The trouble has been getting everyone on the same boat. You might be able to bump two high-end Android phones together to share contact info, but you might not be able do the same from a Android to a Windows phone device, and certainly not to an NFC-less iPhone.

At the counter, too, it was a problem. Some stores had NFC-enabled checkout systems, others didn't; some worked with some phones or apps, others didn't. That's finally getting solved as more and more stores update new point-of-service systems — catching up with systems in Japan and Europe that have been using wireless payment and authentication for years.


"They're not going to enter a market before they can guarantee that their customers around the world can have a good experience with it," said Gartner analyst Brian Blau in a phone interview with NBC News.

Peterson was of the same mind: "Apple was very smart in making sure that all of the components — merchants, networks, technology, security and customers — were in place before they launched."

That doesn't mean it's a guaranteed win for Apple, though. Samsung, Nokia and others have been pushing NFC for years, perhaps hoping to be the early bird that gets the worm, but have derived little benefit. Apple might help push the ball forward, but if it does, it would be hard to say that was because of any of the company's trademark "magic."

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"One of the biggest things they didn't mention was that this platform is pretty much the same NFC platform that has been developed and is in market with ISIS/Softcard," Peterson said, referring to the payment infrastructure built by the major mobile carriers, recently renamed Softcard to avoid association with the Islamic State militant group. "The only significant differences are the use of a biometric instead of a PIN, and linkage to Passbook."

"It's not necessarily going to be a huge success," cautioned Blau. "It depends on getting the iPhone 6 into the hands of consumers, and gosh, how long's that going to take?"

"I would call it very early days," he continued. "Look at the U.S.; you have millions of businesses. This is a large problem to tackle."


That said, we could very well be on the cusp of a mobile payments revolution, as soon as everyone gets on board.

"The Apple brand legitimizes the concept of mobile payments and I think that's probably the most important factor in the announcement," said Peterson.

Blau concurred: "There are already a lot of mobile payments happening today, hundreds of millions of dollars worth — through SMS, through websites, through apps. People are getting more used to paying with the phone. I really think it's a matter of when this tech will be adopted, not if."