What is Apple Pay and How Does it Work?

Last Updated on October 16, 2024 by Robert Luong

As contactless payments become popular, Apple Pay has become a convenient alternative for traditional payment methods. Many iPhone users prefer Apple Pay for both online and in-person transactions because it eliminates the need to carry physical cards or manually enter card information at checkout.

How Does Apple Pay Work?

Apple Pay is a digital wallet service created by Apple Inc. It allows users to make NFC (Contactless) Payments in person, in iOS apps, and on the web using the saved cards in Apple Wallet. Apple Pay is extremely useful for in-person transactions as the customers can complete transactions by tapping their phones to the card reader or credit card machine without having to carry a physical card.

The difference between Apple Pay and Tap to Pay on iPhone?

Apple Pay and Tap to Pay on iPhone are two different features that enhance the way customer pay and merchants take debit and credit card payments.

Apple Pay is primarily a consumer-focused feature. It allows users to store their credit, debit, and prepaid cards digitally on their Apple devices. With Apple Pay, users can make contactless payments in stores, within apps, and on websites.

Tap to Pay on iPhone, on the other hand, is a feature designed for merchants. It enables businesses to accept contactless debit and credit card payments directly on their iPhones without the need for additional hardware. Using the Helcim free POS app, merchants can accept debit, credit, Apple Pay, and other digital wallets.

In summary, Apple Pay is a digital wallet and payment service for consumers, while Tap to Pay on iPhone is a payment acceptance feature for merchants.

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How does Apple Pay work?

With Apple Wallet, customers can "load" their credit and debit cards into their iPhone. When ready to make a purchase, they open Apple Wallet or double press the side-button, and simply tap their phone against the credit card reader to pay.

Apple Pay is possible because iPhones and Apple watches now come standard with an NFC chip, just like credit cards which allows your Apple device to communicate with devices close-by.

What are the benefits of using Apple Pay?

Apple pay provides a new-age POS system payment experience through:

Faster Checkouts: Speed is the benefit that contactless payment in general and Apple Pay in specific brings. Transactions are completed quickly with just a tap or a glance, reducing wait times for you.

Convenience: Losing your debit or credit cards can be both frustrating and risky, especially since many cards can be used for tap payments without needing a PIN. With Apple Pay, you can leave your cards at home and simply bring your phone. For online transactions, Apple Pay allows you to pay with just a few clicks, without the need to input card details every time, making the process faster and more secure.

Security: Apple Pay uses advanced authentication methods such as Face ID, Touch ID, and device passcodes to authorize payments. When you make a payment, your credit card number is never shared with the retailer, so if their system is compromised, your payment information remains secure. Besides, all payments are encrypted, ensuring your transactions are protected.

How to set up Apple Pay?

Setting up Apple Pay is quick and easy. Follow these steps to start using Apple Pay on your iPhone, iPad, Apple Watch, or Mac:

1. Set up Apple Pay on iPhone

1. Open wallet app: On your iPhone, open the Wallet app.
2. Add a card: Tap the plus sign (+) in the top right corner.
3. Enter your card: Use your iPhone’s camera to scan your card or enter the card details manually.
4. Follow Bank Instructions: Follow the on-screen instructions to verify your card with your card issuer.
5. Card Added: Once your card is verified, it will be added to your Wallet, and you can start using Apple Pay.

2. Set up Apple Pay on iPad

1. Open Settings: Go to Settings > Wallet & Apple Pay.
2. Add a Card: Tap Add Card and follow the same steps as on iPhone to add your card.

3. Set up Apple Pay on Apple Watch

1. Open wallet app: On your Apple Watch, open the Wallet app.
2. Add a card: Tap the 3-dot (...) sign, then tap Add Card.
3. Follow instructions: Follow the on-screen instructions to add your cards or select a card you've previously added to your iPhone.

4. Set up Apple Pay on Macbook

1. Open System Preferences: Go to System Settings, then click Wallet & Apple Pay.
2. Add a Card: Tap Add Card and follow the instruction to add your card information.

Is Apple Pay secure?

Apple Pay is designed with security and privacy at its core. Apple Pay uses advanced authentication methods such as Face ID, Touch ID, or your device passcode to authorize payments. This ensures that only you can approve transactions made with your device.

Also, Apple Pay does not store your actual card numbers on your device or on Apple servers. When you add your card to Apple Pay, a unique Device Account Number is created, encrypted, and securely stored in your iPhone, iPad, or Apple Watch. This Device Account Number is used to process your transactions. As a result, your actual card information is never shared or transmitted during a purchase.

Finally, with built-in privacy and security features, Apple keeps customer’s transactions and merchant’s information private.

Are there limitations to using Apple Pay?

Apple Pay is convenient for people who prefer quick checkout but it includes many limitations.

Apple Pay only works on Apple devices. If you don't own an iPhone, iPad, Apple Watch, or Mac, you won't be able to use Apple Pay.

Not all banks support Apple Pay. Although Apple Pay is supported by a majority of banks in the US and Canada, not all banks have adopted this payment method. You can check the Apple Pay list of bank to know if your bank supports Apple Pay.

Apple Pay depends on your phone’s battery. Using your phone as your wallet means you need to keep your device charged. If your device runs out of battery, you won’t be able to use Apple Pay to make a transaction.

Not all merchants support Apple Pay. Not all merchants accept Apple Pay because it depends on their hardware provider. If the provider's terminals do not support Apple Pay, then the merchant cannot accept it.

FAQ

Is Apple Pay the same as Apple Wallet?

No, Apple Pay and Apple Wallet are not the same.

Apple Wallet: Apple Wallet is a digital wallet (app) on your iPhone, iPad, and Apple Watch that stores your credit, debit, prepaid cards, and more. It is where you organize and access all your cards.

Apple Pay: Apple Pay is a payment service that allows you to use the cards stored in your Apple Wallet to make payments in stores, within apps, and on websites.

Can you use Apple Pay online?

Yes, you can use Apple Pay for online transactions. When shopping in apps or on websites that accept Apple Pay, simply select Apple Pay as your payment method at checkout. Then, confirm the payment using Face ID, Touch ID, or your device passcode.

How do merchants accept Apple Pay?

As a merchant, all you need is a terminal that supports NFC, Near Field Communication. Most terminals now support NFC. If your terminal supports NFC, it can process Apple Pay transactions just like any other tap transactions. There’s no need for additional steps or special configurations.

Does Apple Pay charge a fee to merchants?

Apple does not charge merchants any fees for accepting Apple Pay. However, merchants still pay the usual processing fees charged by their payment processor. The fees depend on the payment processor’s pricing model.

The most affordable pricing model for processing credit card payments is currently the Interchange Plus model. This model provides transparency and lower costs for merchants.