Will Apple Pay change your travel?
The definitive answer to that question is "not right now, but maybe later." Apple's widely heralded move will certainly shake up the world of payment, but it's by no means a game-changer.
First, the basics. Apple Pay is an application that lets you use your iPhone to make credit and debit card payments at retail establishments by just tapping your phone on a compatible terminal. It's not a new payment system; instead, it's just a way to simplify the way you use your regular credit and debit cards. That means, for example, if you prefer to use a card that earns airline miles or hotel points, you can still use that card with Apple Pay.
Apple Pay isn't even the only such system -- or even the first. Google announced Google Wallet three years ago, and subsequently PayPal, MasterCard PayPass, Square, and Softcard have appeared. What's unique about Apple Pay is the way it validates your identity. Instead of using a PIN, you press your thumb on the iPhone screen, which reads your previously stored thumbprint.
At this point, Apple Pay is limited to Apple phones. Many Android phones are enabled for Near Field Communication (NFC), however, and NFC-enabled terminals can accept data from other systems. So, you can use one of the competitive systems on an Android device.
The new NFC-based technology applies mainly to on-premises charges, such as merchandise, restaurants, and hotels, not airline tickets you buy online.
In fact, the real test of Apple Pay and other NFC credit and debit card payment systems isn't in the technology at all. Instead, it's part of a much larger battle about payment systems, generally, that could eventually change your travel purchase patterns substantially. The battle is centered on the desire of many sellers to cut the bank card-processing networks entirely out of the payment loop. To that end, some 50 very important retail chains are promoting a different system. They want you to switch to a retailer-backed system called "CurrentC." The idea behind CurrentC is to eliminate credit cards and debit cards entirely -- and the fees that sellers now have to pay on credit charges and debit card use. Instead, CurrentC payments will come directly from your own bank account, not through the AmEx, MasterCard, or Visa networks. And that's the coming big struggle:
• Obviously, big sellers, including airlines and hotels along with retailers, love the idea of getting rid of credit card fees, which amount to many billions every year. Already a few chains, including Best Buy, CVS, Rite Aid, and Wal-Mart, have started blocking Apple Pay even where they have NFC-enabled terminals.
• You, on the other hand, may not be so hot for any system that taps your bank account directly and prevents you from deferring payments -- to say nothing about a system that doesn't earn miles or points.
According to many industry mavens, CurrentC may not be ready for prime time. It doesn't use NFC; instead, it relies on scanning a "Quick Response (QR) Code" displayed on the device's screen -- one of those square matrix codes that you see in so many uses. At least so far, CurrentC security features don't seem as robust as those of Apple Pay.
Presumably, even those companies blocking Apple Pay will still accept old-fashioned plastic.
But, in the long term, sellers' incentive to get rid of credit card fees will remain powerful, so the payments battle will continue. Increasing numbers of sellers may start charging extra for credit card purchases or giving "discounts" for cash or cash equivalents.
Send email to Ed Perkins at
eperkins@mind.net
Travel on 12/07/2014