Rich Mogull on Apple Pay

Writing for Macworld, my friend Rich Mogull explains Apple’s new Apple Pay system for making secure digital-wallet transactions. Some choice quotes, but you really need to read the whole thing:

Using per-device tokens means that only the bank that issued the card (or its payment network) ever has your card: You don’t have to trust Apple with it. This is different from the Google Wallet system, in which Google holds your cards on their servers. (For the record, Google is exceptionally good at maintaining that kind of security).

Apple Watch will have its own secure element and Device Account Number. We don’t yet know the process for registering your card on the watch, but it is expected you’ll be able to use the watch without an iPhone to make payments. Go for a run wearing your Apple Watch, and you’ll be able to buy water at a gas station without pulling out a wad of sweaty cash from the tiny pocket in your running shorts.

But aside from the technical differences, Apple is in a unique position due to its business model. It doesn’t want or need to track transactions. It doesn’t want or need to be the payment processor. It isn’t restricted by carrier agreements, since it fully controls the hardware. Google, although first to the market by a matter of years, is still hamstrung by device manufacturers and carriers. Softcard is hamstrung by the usual greed and idiocy of mobile phone providers. PayPal has no footprint on devices.

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