all right so Apple's Apple pay lets you place your finger on your phone and then
like wave it at payment terminals to buy stuff I mean it's basically magic just
like everything that they do but for folks who want more than the Bippity
Boppity Boo Harry Potter explanation you might be asking questions about exactly
how all this works and especially whether Apple's claims with respect to
transaction security can be believed but
let's start with a brief rundown of how a regular credit card transaction Works
whether you swipe chip or wave financial
institutions apply to join a card Network like Visa or Mastercard putting
them in the business of issuing cards to individuals and businesses and or the
business of acquiring merchants or stores to accept payments through the
network from the aformentioned individuals and businesses when you use
your credit card your issuing Bank receives the merchant ID card
information and transaction amount to check for fraud then approve or decline
the transaction if it's approved the money you just spent flows from your
account through a payment processor that deducts what is known as an interchange
fee usually in the neighborhood of 2% for card present transactions and
significantly more when the card can't be presented like online that is divvied
up between your bank or whoever your credit card issuer is to cover the cost
associated with acquiring customers fraud expenses and profit and then a
much smaller portion to the network like Mastercard or VISA now let's look at how
Apple pay differs the NFC short- range
Wireless communication technology is the same as you'll find in millions of
plastic cards and Android phones already worldwide but the back end is where
Apple has actually innovated here instead of handing your card and ID to a
stranger in a random store effectively giving personal information to the
cashier and financial information to the merchant Apple authenticates your
personal information with your credit card Network once when you take a
picture of the card to get it authorized for Apple pay then they get a token
called a device account number that is tied to your particular phone or watch
and a key generator that creates the single-use security codes that are
generated at the time of each transaction to be sent back to your
issuer to decrypt and authorize your payment Apple sends this token to the
user's phone that stores it in a special secure memory and execution environment
called the secure element and according to them once this is done even they
cannot retrieve the payment details so that's how it works Apple hasn't become
a bank or anything and they actually never even touch your money or payment
details during your day-to-day transactions so what's in it for them
you might ask well unlike the also nfc-based Google Wallet which is more of
an open yeah you can join if you want or
whatever uh initiative from Google Apple pay is the product of closed room deals
with the financial institutions that reportedly entitles Apple to a small cut
of The Interchange fee because they again reportedly argued that easier
trans transactions will drive customers to pay electronically rather than with
cash increasing the total interchange fee bucket for everyone involved and
they also argue that fingerprint authentication although it's far from perfect will reduce fraud where
customers are using NFC enabled iPhones or apple watches paired to supported
devices to make payments meaning that less of that interchange fee will be
used to reimburse well the victims of fraud so this as fast as possible not
thorough as possible and while I did mention Google Wallet in this video and
I did mention that it's also NFC based there are some very significant
differences between it so let me know if you guys would be interested in seeing a
standalone follow-up video that also includes some information about the pros
and cons of uh Apple pay and Google Wallet and then the upcoming currenty so
just a general one about digital wallets
love to see your comments guys and speaking of loving to see your comments
so that was an awkward segue I mean I've got a haircut it's a completely
different day I probably look entirely different and all that stuff but not
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