Apple partners with American Express, Visa and Mastercard

Apple transfers data storage onto China

By Nicole Arce

Apple is reportedly partnering with America’s major credit card companies to provide consumers a mobile payments system that will allow them to purchase goods at brick-and-mortar stores simply by passing their iPhones over the cash register.

Just over a week before Apple launches the unannounced but highly anticipated iPhone 6 on Sept. 9, Re/code published a report citing “sources familiar with the talks” that Apple has forged a partnership with American Express for its new mobile payment system. This was followed by a report published by Bloomberg that the iPhone maker is also working with Visa and MasterCard to provide a mobile payment system enabled by NFC.

NFC, or near-field communications, is a wireless technology that enables short-distance communication between two devices, in this case, the iPhone 6 and the point-of-sale registers. By using Apple’s Touch ID fingerprint recognition technology introduced in the iPhone 5S, customers can use their credit cards to pay for goods and services by simply tapping the screen of their iPhone while keeping payments more secure than sending banking and credit card details over Wi-Fi or Bluetooth.

Apple is not the first company to make its foray into mobile payments. Google, for instance, already has Google Wallet, which goes unsupported by America’s major wireless carriers because they have their own electronic payments system called Isis. Both Google Wallet and Isis come with their own digital prepaid cards that can be loaded using any card, which is convenient for users since they can use any credit card.

Other smartphone makers, including Apple’s major rival Samsung, already has NFC-enabled payments on some of their higher-end phones. For instance, Samsung’s Galaxy S5 can be used to pay for purchases at Walgreen drugstores simply by tapping the S5 over the cash register.

However, mobile payments remain a niche sector because customers and retailers lack awareness of the new technology. With Apple having the biggest smartphone market share in the United States and more than 800 million credit card records stored in iTunes, it will not be surprising if paying with a smartphone becomes mainstream once the NFC-enabled iPhone 6 ships later this year.

“Love it or hate it, Apple drives a lot of standards in the industry,” says Ben Bajarin, analyst at Creative Strategies. “They are the mover in these markets. When they do something, the industry seems to follow.”

Others, however, point out that the success of any mobile payments system will depend largely on how the retail industry will respond. Many stores all over America still do not have point-of-sale systems that enable mobile payments over NFC, while a group of large store chains including Wal-Mart have formed a group in 2012 with the goal of creating their own mobile payments system. The group has yet to come up with its own solution, however.