Apple Pay paired NFC, one-time tokens and Touch ID, and out-ran rival phone wallets

MIT Technology Review's February 2015 profile described Apple Pay, launched in autumn 2014, as a combination of familiar technologies: NFC built into the iPhone 6, tokenised card details and Touch ID. The phone stores no real card numbers and even the merchant does not see them; each transaction creates a unique code usable only once, and a thumbprint triggers payment, with no need to open an app as Google Wallet or PayPal required.

Early signs were strong. Whole Foods saw almost 2% of store sales through Apple Pay by mid-January, McDonald's said it was half its mobile payments, and Walgreens' mobile payments doubled. A study found 60% of customers used it on multiple days in November, three times as often as new PayPal customers. A Poynt executive said his terminal orders soared. Banks representing 90% of US consumer payments supported it.

The timing mattered: card networks set an October 2015 deadline for merchants to upgrade to chip-card terminals or bear fraud costs, and most new terminals have NFC built in.

Pair NFC with a device-held token, one-time code per payment and a thumbprint, so tapping is both faster and safer than a card.

Apple controls both iPhone hardware and software, giving it more than Google could on Android.

Single-use codes mean stolen merchant databases hold no usable card number.

A fingerprint tap removes PINs and signatures, speeding checkout.

The coming chip-terminal deadline pushed merchants to buy NFC-capable terminals anyway.

Controlling hardware and software lets you assemble existing technologies into one effortless flow; and launch timing can ride the merchant terminal upgrade cycle.

The review cautions that in 2014 US mobile in-store payments were $3.7 billion against $4 trillion in retail spending, that only iPhone 6 owners could use it, and that 98% of US stores lacked suitable terminals. It estimated Apple's 0.15% fee would be a small slice of revenue, with the larger gain in iPhone appeal. The writer says none of the technologies was new; Apple's contribution was the combination.