More Info: Apple Pay Hands On (Engadet)
When reading this I am less wowed by this.
Apple is giving your iPhone a CC number (Just like Google)
They then give that number plus a one use CCV (This is new)
Most of the Major CC players are on board.
220,000 retailers will support this system at launch.
The question in my mind, will you get your rewards point / cash back if you use this?
Apple has Visa, MasterCard, American Express, Wells Fargo, BoA, Chase and Citi on board so maybe?
I don't with Google Wallet, which is why I don't use it any more.
This may end up being bigger than the watch for Apple in the long run.
First, all devices (iPhone 6/6+) are given a unique identifier for purchases. When you use the device against a PayWave terminal, the phone passes a unique transaction ID instead of the credit card number. In fact, the phone never has the actual credit card numbers stored in it...just the device number that is generated based on that card. So if the phone is stolen, you don't have to cancel all your cards. You'll also need your fingerprint on the TouchID sensor to approve the transaction, so a stolen phone is pretty useless too. So this achieves security by:
No credit card numbers that can be stolen or skimmed.
No pin numbers that can be stolen.
No CCV number to remember or get stolen...there's a dynamic number passed with the transaction for authentication.
Even if a cyberthief installs malware on the terminal, he's just getting encrypted data. And if he figures out how to decrypt it, then the transaction number which substitutes for the card is ONE USE ONLY, and was already used for the previous transaction.
You should (in theory) still have the same relationship with your credit card issuing bank, as well as all of the card benefits. Yes, there have been some issues with banks not recognizing card awards used with PayWave, but that's not Apple's fault.
Entry of your card in the phone is literally taking a photo of it (which isn't kept), the phone does the rest. And whatever card you have with Apple iTunes Store can be added automatically.
The phone has a special secure area to keep the private information, not unlike what Apple did with the fingerprint data.
Ironically, PayWave seemed to be fading as a feature on credit cards. Only one of my many cards had it...the Chase Freedom Mastercard. When Chase retired it to go to Visa, PayWave was dropped. But using this system, ALL of my cards (save Discover) would become PayWave capable.
One more thing...Apple is not keeping or selling any of the transaction data. The last thing I want is another company with my financial data. There are a lot more working PayWave terminals out there than EMV right now. I can't wait for this to launch, but alas, my iPhone 5s is still on contract for another year.