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Apple Pay takes on shopping

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Unsurprisingly Apple has launched two new larger iPhones, the iPhone 6 and iPhone 6 Plus. They also released their first major new product since the iPad, the greatly anticipated Apple Watch – finally a reason to retire that retro 1980s Casio. But for those of you with an interest in the cloud it is the launch of Apple Pay that should be pulling in the headlines.

Apple Pay intends to change how we shop with an innovative contactless payment technology. The system uses a combination of device and a unique, cloud-based security system to complete transactions. Customers will be able to shop without ever opening their wallets.

Before the launch event there had been rumours, and plenty of leaks, that Apple was working on a payments system. Initially Apple Pay will only work with the new iPhone 6 and next year’s Apple Watch. iPhone 5 users tethered to the Apple Watch will also work.

Unlike many on the other side of the Atlantic most of us are already used to contactless payments. But the big difference with Apple Pay is that this new system takes the card out of everyday purchases. The retailer never has to see the customer’s card.

Apple Pay intends to change how we shop. “Your wallet, without the wallet” as Apple says.

According to Apple when a customer presents their credit or debit card for payment the card number and identity are on display. This visibility is a risk. With Apple Pay the actual credit or debit card is never risked. Instead a unique Device Account Number is assigned, encrypted and securely stored on a dedicated chip in iPhone and Apple Watch. When a customer makes a purchase the Device Account Number alongside a transaction-specific dynamic security code is used to process your payment.

Customer details are never stored on Apple servers. The actual card numbers are never shared with merchants or transmitted with payment. Apple also says it doesn’t save transaction information. With Apple Pay, payments are private – the shopping version of “no follow” we hope. This is good news especially given the recent high profile celebrity iCloud hacks.

“Security and privacy is at the core of Apple Pay. When you’re using Apple Pay in a store, restaurant or other merchant, cashiers will no longer see your name, credit card number or security code, helping to reduce the potential for fraud,” said Eddy Cue, Apple’s Senior Vice President of Internet Software and Services.

Apple announced that Apple Pay works with over 220,000 US retailers, including Nike, Staples, Subway and McDonalds. The UK and Europe should follow next year. Apple will also launch a new Apple Pay API for developers to integrate the system into their apps.

Looking beyond the hardware announcements this is a good move for Apple and for the cloud marketplace. Apple Pay supports credit and debit cards from American Express, MasterCard and Visa. More of the big banks, many of whom rely on enterprise cloud networks to support their banking, are likely to join up. There needed to be innovation in payments systems and Apple Pay looks to be breaking new ground.