Apple Pay: Is It Worth the Risk of Giving up Your Wallet?

September 18, 2014

Even before Apple’s September 9, 2014, event, which introduced the world to the iPhone 6 and the new “smartwatch,” there were signs that Apple would be making a play to replace your cash and credit cards. Apple’s patent dubbed “Method To Send Payment Through Various Air Interfaces Without Compromising User Data” was filed in September of 2012 and it was published at the beginning of this year. The patent laid out a digital wallet system that would allow users to make secure electronic payments at a wide variety of retailers. Much to the surprise of some tech writers, Apple’s new service, known simply as Apple Pay, will launch this coming October.

With retailers such as Bloomingdale’s, Macy’s, McDonald’s, Subway, and Walgreens ready to roll with Apple Pay, the act of making a purchase with your iPhone is set to become an immediate reality.

So, what is to stop Apple from revolutionizing the way every consumer makes a purchase? The first obstacle might be finding a customer base that is willing to trust Apple’s security. A recent Thrive Analytics survey revealed that 46% of consumers had not used a digital wallet because they were concerned about the security of mobile payments. This survey, which was published on July 23, 2014, might now reveal data that is less favorable to Apple following the leak of nude photos of celebrities, including Jennifer Lawrence and Kate Upton, that is being blamed on hackers’ ability to target Apple’s iCloud online data backup service. While it is unlikely that a hacker would put forth the required effort to gain access to personal photos of the average individual, their personal financial information is likely a different story.
Professors Edward Castronova and Joshua A.T. Fairfield recently published an article in the New York Times titled “The Digital Wallet Revolution,” which touched on some of the emerging legal implications that will arise from Apple’s digital wallet that go beyond the most obvious crime of computer hacking. One criminal example that they pointed out is based on tax fraud. “If you get caught cheating on your taxes and flee the country, then the government could compel your bank to freeze your assets and cough up the money. But what if there is no bank?” A digital wallet will ultimately create a system where exchanges are easier to perform and more difficult to regulate.
Apple Pay is certainly not the first mobile payment system. Both Google Wallet and Softcard provide a similar service, but Apple is in a position to revolutionize the market. Does everyone remember the iPod? It certainly was not the first MP3 player, but it is the one that revolutionized the music industry. Apple Pay is different than both Google Wallet and Softcard because of Apple’s technology and their unique business model. Apple Pay will be available on every new iPhone 6 and Apple will not track your transactions for advertising data. Apple is in the unique position to put their efforts behind improving the user interface because, rather than using Apple Pay to make a profit, Apple Pay is meant to drive consumers to the iPhone.
The legal conundrums that Apple Pay presents are identical to those created by both Google Wallet and Softcard. The difference is that both legislatures and administrative agencies should not be willing to bet against Apple’s ability to change the market. Apple’s unique cultural and business position places them in a position to revolutionize the way purchases are made on a daily basis. In a short period of time, Apple Pay may be the most common form used to make a monetary purchase in developed countries. It will be the responsibility of modern legislatures and administrative agencies to stay ahead of the curve and work to create systems that are able to adjust to the new changes.