The world has been moving towards a cashless economy for some time now.
Credit cards became more popular around a decade or so ago, and using cash became the exception quickly.
But perhaps less expected was the move that followed: apps that turn your physical credit cards, store cards, loyalty cards, and almost everything else that currently takes up space in your wallet, into relics of yesteryear.
Apple Pay allows Apple users to make purchases from iPhones, Apple Watches, and limited other devices without ever reaching into your bag or pocket.
Not only does Apple Pay do away with the need for a physical credit card, but it also offers other benefits, like using your device’s inbuilt GPS to recognise when you’re in a particular store and presents that store’s loyalty card for you, ready to use.
Pretty cool right?
As with most Apple technology, using Apple Pay is simple and intuitive.
Most of the questions that people ask about Apple Pay are not about how to use it or how it can make your life easier – that part we get.
Instead, people have concerns about how secure Apple Pay really is, whether any hidden fees and charges are being applied, and the effect that it has on our money management and the psychology of buying.
So here’s the 3 things you need to know about using Apple Pay.
So, first up – security.
Somehow it just sounds counterintuitive to load a lifetime’s worth of credit card details (don’t forget the three-digit CVC on the back), banking details, store cards, charge cards, and everything else onto a device.
What about hackers? What about devices being lost or stolen? You’re kind of giving your information to them on a silver platter.
As it turns out, Apple has taken some serious measures to ensure your security when using the Apple Pay system.
Importantly, when you enter your credit card details into your Apple Pay account, those details are not actually stored on your device. Nor are they transferred to merchants when you make a purchase.
Instead, every time you enter a new card or payment system into your Apple Pay account, the encrypted details are stored in a unique Device Account Number. Say what?
This number – and not your actual credit card details – is what is stored on your device.
Ok, you say – but what about other people accessing your device?
The majority of iPhones – all except the latest releases – rely on Touch ID fingerprint sensors to access Apple Pay. So until it can recognise your unique fingerprint, no access will be granted.
For those people with an iPhone X, you’ll know that fingerprint technology is so last year and facial recognition is where it’s at.
Alright then, but what about if your device gets lost or stolen?
We now know that the would-be thief won’t be able to make any purchases using your Apple Pay account, unless they have also stolen your fingerprint or face.
They will, however, be able to view the last four digits of your cards, and – perhaps most worryingly – your billing address. Stalker alert!
But apple have thought of that too – enter, Find My iPhone.
As soon as you notice that your device has been lost or stolen, you simply need to use someone else’s iOS device to lock down your device using Find My iPhone. And if necessary, you can choose to wipe your device completely.
Fees and Charges
So what about costs?
Nothing is free, so where are the hidden fees and charges that must surely apply to transactions that take place through Apple Pay?
In Australia at least, it is the banks that bear the brunt of fees charged by Apple to access their service.
In fact, Apple was so keen that end users not be financially penalised for using Apple Pay that they have expressly restricted Australian banks from passing on even a proportion of their Apple Pay fees to the bank’s customers.
Some of Australia’s biggest banks have even been lobbying the ACCC to have this restriction lifted so they don’t have to bear the full brunt of Apple’s fee structure themselves.
The latest in this battle has seen the banks drop their petition to pass on fees and charges to consumers, instead focusing on other unrelated gripes they have with Apple Pay.
So at present, using Apple Pay doesn’t cost you a thing more.
Well – this one always bears the brunt of new technology that makes it easier to buy things.
When people stopped using cash to make purchases and started reaching for their credit cards instead, a strange thing happened.
Although consumers were well aware that they would need to pay for their credit card purchases when the bill came at the end of the month, they were still more inclined to spend more – and indulge in a greater number of indulgent purchases and impulse buys – than if they were paying with cash.
Psychologists and behavioural economists talk about the “pain of paying”, which goes a long way towards explaining this change in spending behaviour between cash and credit.
Put simply, handing over physical cash is more painful than swiping a credit card.
When you pay with cash, you physically hand over your hard-earned money, never to see it again.
When you use a credit card, however, you are significantly more removed from the transaction and can rely on your “future self” to take care of the problem when the credit card bill arrives.
Contactless payment systems like Apple Pay are in their technological infancy, so there is little research on how this new way of paying will affect the way people manage their money.
But my gut tells me it makes it harder to manage your money – if you don’t have a money plan to being with.
Sure it might be better than a credit card if it’s linked to your debit card instead – after all, in that case it’s still your money your spending, not the banks.
BUT – what it still makes it easier to spend. And if you’re not physically handing over cash, you’re still side-stepping the “pain of paying” phenomenon.
If you’re wearing an Apple Watch or have your phone in your hand, you don’t even need to reach into your bag or pocket to make a purchase.
The more convenient it is to pay for something, the more likely it is that someone will buy something without giving it a moment’s thought.
So while security may have been what’s keeping you from using it – it seems that Apple has done everything it can to make contactless payment as secure as possible.
In fact, Apple Pay is arguably more secure than credit cards, and infinitely more secure than physical cash where possession truly is nine-tenths of the law.
The biggest threat to you – is how it does or will affect the way you consume. Over consumption is the greatest threat to your money management security in today’s consumer society.
So if you notice your spending more and faster than ever before with Apple Pay – you might want to consider swapping back to the old debit card.
Putting just a few seconds more resistance between you and another pair of shoes might not seem like a big deal right now.
But if doing so ends up cutting the number of times you actually purchase something down by 50% – that’s likely going to mean a hell of a lot of extra cash come the end of the year!
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