Everyone’s likely read about ApplePay recently. If you haven’t, it’s a mobile payment system in which iPhone users can make credit card payments for purchases via their iPhones instead of whipping out their credit cards to “swipe” or “dip.” They hold their iPhone (6 or 6 Plus only at this time) near the payment terminal, which activates ApplePay. They confirm their purchases via a fingerprint scan or passcode on their iPhone.
Credit card use has become the preferred payment method for purchases by travelers world-wide. According to the US Department of Commerce, International Trade Administration, for US travelers visiting overseas destinations in 2012 (the last year reported) 65 percent of all purchases for travelers generally were made via credit cards. Not surprisingly, that rises to 80 percent for business travelers.
Like most travelers away from home, I use credit cards to pay for all my goods and services, whenever possible. With credit cards, I gain leverage with my vendors, as well as fraud and theft protection unavailable otherwise. For the few times I need cash, I obtain it from an ATM with a debit card at my destination, which isn’t often. I no longer use traveler checks.
Apple pay isn’t the first mobile payment system, nor can it be the ultimate mobile payment system any time soon, but it is the best mobile payment system available at this time, in my opinion.
You might be asking yourself how an iPhone might be better than using your credit cards to make purchases.
To start, your actual credit card information isn’t stored on the iPhone, nor is it transmitted with any purchase transaction, as it is when you use a credit card itself. What’s transmitted is a unique encrypted and securely stored “Device Account Number” plus a transaction-specific dynamic security code, nothing more.
No clerk, waitress or other person sees any particulars of a credit card account. No store, hotel, restaurant, etc., has a record of one’s credit card information when an ApplePay transaction is used.
ApplePay is even more secure than EMV (Europay, MasterCard and Visa smartchip) credit cards already in use in Europe, which become the standard in the US by October 2015. EMV credit cards generate a one-time code for each transaction, thwarting thieves who use stolen account numbers to make counterfeit cards. Unfortunately, like magnetic stripe based credit cards, that doesn’t stop thieves from using stolen EMV cards in stores or online.
Unless the thief can somehow get past the iPhone’s fingerprint scan or passcode, it can’t be used for in-person or in-app store purchases. Since the phone doesn’t hold a record of your credit card information itself, it can’t be used for online purchases.
Credit card users can be affected more when they travel than when home, as it can take several extra days to have a stolen or compromised credit card replaced while traveling. Therefore, a payment system which can reduce credit card theft or fraud is a welcome addition to any traveler’s security arsenal.
There are a number of major mobile payment systems available beyond ApplePay, including: Google Wallet, LoopPay, Softcard, PayPal and the soon to be available CurrentC. Each has advantages and disadvantages.
• Google Wallet — unlike ApplePay, which is somewhat easier to use and has already obtained support from a large percentage of credit card issuers in the US, Google Wallet has not managed such card issuer support, and as a result, essentially creates a MasterCard debit account for each user which is used to allow user credit cards to be charged on the back end. Unfortunately, in general, since user credit cards aren’t charged directly by vendors, often reward programs and other card benefits are lost when using Google Wallet.
• LoopPay — uses its own transmitter attached to smartphones to mimic credit card magnetic swipe signals at payment terminals. It therefore works with most credit cards and merchants. Unfortunately, when the US almost universally switches away from magnetic stripes to EMV technology, most every vendor will be unwilling to use LoopPay, because starting in October, 2015, liability for fraud shifts from US card issuers to merchants who don’t use EMV transactions for chipped credit cards at that time.
• ApplePay — unlike earlier mobile payment systems, Apple has already been able to get the support of major credit card issuers, including American Express and fifteen of the largest Visa and MasterCard issuing banks. Apple has already signed up 40 major retailers in the US to accept ApplePay. Once a card is inputted into a supported Apple device, using one’s fingerprint or stored access code will authenticate the transaction, and no actual credit card information is stored in the iPhone.
• Softcard — works with only three credit card issuers and isn’t widely accepted online or by stores.
• Paypal — while widely accepted online, is accepted at virtually no stores.
• CurrentC — due next year, it will be accepted by quite a few merchants, but payment through it will be solely through personal checking accounts, member gift cards, and some member-backed credit and debit cards, but no bank issued credit cards such as Visa and MasterCard.
For international travelers, there is currently a universal problem with all these US-based mobile payment systems and others in the world. None that I’m aware of work in stores worldwide, but ApplePay is due to be open for business in Europe next year. When that happens it will finally begin to make mobile payment systems really important and highly relevant for travelers.
(Image: ApplePay on the iPhone 6 and iPhone 6 Plus, photo courtesy of Apple Inc.)
