Lesson Idea: Evaluating Apple Pay

Oct 21, 2014
Credit Cards, Lesson Idea, Debit Cards, Payment Types, New Products

The world of payments is abuzz with news of Apple Pay which officially launched on Monday.  The concept:  instead of carrying credit cards you make payments swiping your IPhone 6 (not available on earlier models) using a technology called NFC (near-field communication ).  How about asking your students to evaluate the pros/cons of this new payment method by evaluating media reports and videos?

Here are a few resources that I found valuable:

“We’re totally reliant on the exposed numbers and the outdated and vulnerable mag stripe,” Timothy D. Cook, Apple’s chief executive, said in Cupertino, Calif., last month. “Which all of us know aren’t so secure.”  Apple is working with major credit card companies like Visa, American Express and MasterCard to integrate a so-called tokenization system into Apple Pay. The technology sends a secure code to merchants instead of a credit card number, which experts say will make credit card data theft less likely. Every transaction will also come with a unique encoded passcode that will help determine whether a transaction is legitimate.

  • USA Today reporter walks through the steps to set up Apple Pay (See the screenshots necessary to get started on Apple Pay here):

But first things first—you have to let Apple Pay know which credit and debit cards you intend to use with Apple Pay. To do so on the iPhone 6 or 6 Plus, you launch the Passbook app on the phone.  As it happened I didn’t even have to manually enter the credentials for the American Express card I’d use as a default card with Apple Pay because it was already the card Apple had on file for my iTunes and App Store purchases and I was given the opportunity to use it here. As a security measure I still had to manually enter the 4-digit code on the front of the card.(I was good to go, but a friend told me that he actually had to call American Express before his card could get verified.)

Next, I added credentials for a separate Chase Visa card. You can take a picture of the card using the phone’s camera, with the credit card information then filled in. That didn’t work in this case, so I manually added the required information, basically my account number, expiration and a separate security code. There was one additional step: I got an email with a one-time code I had to type in to finally authorize my card.  For each credit card I had to agree to the terms of service, but in total the set-up of the two cards took no more than a few minutes.

  • Bloomberg News video showing Apple Pay in action; highlights the fact that retailers should love the fact that it speeds transactions thereby cutting down wait times at check-out.
  • Highlights the fact that many retailers still not accepting this payment method (SJ Mercury News):

    You can use Apple Pay at any retailer or restaurant that accepts contactless payments. Apple estimates there are about 220,000 such establishments nationwide, which sounds like a lot until you realize there are about 3.7 million retailers, according to the National Retail Federation. As I took my ad hoc shopping spree down Lincoln Avenue and Almaden Expressway in South San Jose, I was met with more than a few blank stares when I asked if I could use Apple Pay.

  • However, most retailers will be upgrading their payment systems shortly to accommodate “chip and pin” cards so mass adoption around the corner (NY Times):

Accepting Apple Pay and some other mobile payment technologies usually relies on technology inside the payment terminals at registers, like at the stations where a consumer swipes a credit card. By next fall, though, American merchants face a deadline to upgrade their credit card terminals to accept E.M.V. — which stands for Europay, MasterCard and Visa — a technology that makes credit transactions more secure for consumers. Many believe those new terminals will also accept payments from Near Field Communication-enabled devices like the iPhone 6.

“Apple’s timing here is an astute stroke of brilliance,” said Norm Merritt, president of ShopKeep, a start-up that sells point-of-sale products for small businesses. “People will already have to invest in new E.M.V.-enabled machines. N.F.C. is just a few bucks more.”

After students have analyzed pros and cons and listed their resources (key media literacy skill is to understand what makes a reliable source), have them answer the question:  Would they use Apple Pay?  Why or why not?

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.