WEBVTT

00:00:00.160 --> 00:00:07.040
all right so Apple's Apple pay lets you place your finger on your phone and then

00:00:04.319 --> 00:00:11.240
like wave it at payment terminals to buy stuff I mean it's basically magic just

00:00:09.040 --> 00:00:15.519
like everything that they do but for folks who want more than the Bippity

00:00:13.200 --> 00:00:19.560
Boppity Boo Harry Potter explanation you might be asking questions about exactly

00:00:17.480 --> 00:00:24.640
how all this works and especially whether Apple's claims with respect to

00:00:21.439 --> 00:00:26.199
transaction security can be believed but

00:00:24.640 --> 00:00:31.480
let's start with a brief rundown of how a regular credit card transaction Works

00:00:28.199 --> 00:00:33.440
whether you swipe chip or wave financial

00:00:31.480 --> 00:00:38.200
institutions apply to join a card Network like Visa or Mastercard putting

00:00:36.040 --> 00:00:42.440
them in the business of issuing cards to individuals and businesses and or the

00:00:40.640 --> 00:00:46.199
business of acquiring merchants or stores to accept payments through the

00:00:44.760 --> 00:00:50.399
network from the aformentioned individuals and businesses when you use

00:00:48.559 --> 00:00:54.480
your credit card your issuing Bank receives the merchant ID card

00:00:52.120 --> 00:00:58.559
information and transaction amount to check for fraud then approve or decline

00:00:56.600 --> 00:01:02.640
the transaction if it's approved the money you just spent flows from your

00:01:00.559 --> 00:01:06.960
account through a payment processor that deducts what is known as an interchange

00:01:04.640 --> 00:01:10.479
fee usually in the neighborhood of 2% for card present transactions and

00:01:08.840 --> 00:01:14.960
significantly more when the card can't be presented like online that is divvied

00:01:12.759 --> 00:01:18.520
up between your bank or whoever your credit card issuer is to cover the cost

00:01:16.920 --> 00:01:22.439
associated with acquiring customers fraud expenses and profit and then a

00:01:20.680 --> 00:01:27.840
much smaller portion to the network like Mastercard or VISA now let's look at how

00:01:24.840 --> 00:01:30.680
Apple pay differs the NFC short- range

00:01:27.840 --> 00:01:34.520
Wireless communication technology is the same as you'll find in millions of

00:01:32.560 --> 00:01:39.320
plastic cards and Android phones already worldwide but the back end is where

00:01:37.079 --> 00:01:44.280
Apple has actually innovated here instead of handing your card and ID to a

00:01:42.200 --> 00:01:48.680
stranger in a random store effectively giving personal information to the

00:01:45.920 --> 00:01:52.640
cashier and financial information to the merchant Apple authenticates your

00:01:51.040 --> 00:01:56.880
personal information with your credit card Network once when you take a

00:01:54.799 --> 00:02:01.439
picture of the card to get it authorized for Apple pay then they get a token

00:01:59.240 --> 00:02:06.360
called a device account number that is tied to your particular phone or watch

00:02:03.960 --> 00:02:09.959
and a key generator that creates the single-use security codes that are

00:02:08.399 --> 00:02:13.879
generated at the time of each transaction to be sent back to your

00:02:11.920 --> 00:02:18.440
issuer to decrypt and authorize your payment Apple sends this token to the

00:02:16.120 --> 00:02:22.160
user's phone that stores it in a special secure memory and execution environment

00:02:20.200 --> 00:02:26.760
called the secure element and according to them once this is done even they

00:02:24.440 --> 00:02:30.640
cannot retrieve the payment details so that's how it works Apple hasn't become

00:02:28.400 --> 00:02:34.959
a bank or anything and they actually never even touch your money or payment

00:02:32.959 --> 00:02:39.680
details during your day-to-day transactions so what's in it for them

00:02:37.040 --> 00:02:45.280
you might ask well unlike the also nfc-based Google Wallet which is more of

00:02:41.879 --> 00:02:48.040
an open yeah you can join if you want or

00:02:45.280 --> 00:02:52.120
whatever uh initiative from Google Apple pay is the product of closed room deals

00:02:50.080 --> 00:02:57.080
with the financial institutions that reportedly entitles Apple to a small cut

00:02:54.680 --> 00:03:01.280
of The Interchange fee because they again reportedly argued that easier

00:02:59.480 --> 00:03:06.159
trans transactions will drive customers to pay electronically rather than with

00:03:03.840 --> 00:03:10.159
cash increasing the total interchange fee bucket for everyone involved and

00:03:08.840 --> 00:03:16.280
they also argue that fingerprint authentication although it's far from perfect will reduce fraud where

00:03:13.959 --> 00:03:20.519
customers are using NFC enabled iPhones or apple watches paired to supported

00:03:18.239 --> 00:03:24.920
devices to make payments meaning that less of that interchange fee will be

00:03:22.080 --> 00:03:31.000
used to reimburse well the victims of fraud so this as fast as possible not

00:03:28.959 --> 00:03:35.080
thorough as possible and while I did mention Google Wallet in this video and

00:03:32.720 --> 00:03:38.439
I did mention that it's also NFC based there are some very significant

00:03:36.879 --> 00:03:42.840
differences between it so let me know if you guys would be interested in seeing a

00:03:40.560 --> 00:03:47.439
standalone follow-up video that also includes some information about the pros

00:03:44.640 --> 00:03:53.120
and cons of uh Apple pay and Google Wallet and then the upcoming currenty so

00:03:49.959 --> 00:03:55.400
just a general one about digital wallets

00:03:53.120 --> 00:03:59.879
love to see your comments guys and speaking of loving to see your comments

00:04:04.439 --> 00:04:10.760
so that was an awkward segue I mean I've got a haircut it's a completely

00:04:08.680 --> 00:04:14.079
different day I probably look entirely different and all that stuff but not

00:04:12.720 --> 00:04:19.280
nearly as awkward as the thing that you're about to see today sponsor is

00:04:16.440 --> 00:04:24.759
fractal design and they have cooked up a humiliating thing for me to do once

00:04:22.800 --> 00:04:28.680
again this is a banana and I think you guys know what those are for

00:04:34.080 --> 00:04:37.440
Fu great

00:04:38.479 --> 00:04:44.919
T cooling fans

00:04:42.800 --> 00:04:49.479
with Des they really good

00:04:57.960 --> 00:05:01.639
sponsorship really

00:05:12.639 --> 00:05:17.240
this all right guys thanks for watching like this video if you liked it dislike

00:05:16.039 --> 00:05:20.960
it if you disliked it leave a comment letting me know if you have suggestions

00:05:19.240 --> 00:05:26.360
for future episodes the fast as possible just like this one and as always don't

00:05:22.759 --> 00:05:26.360
forget to subscribe

00:05:26.639 --> 00:05:32.720
and Josh man really dude