Apple's Touch ID Payments: Farce or Force for Change?

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Apple Pay appears to be missing one key thing: A reason to use it. Most other mobile wallets come with a reward program, but Apple currently isn't going that route.

Instead, Apple is using security as a selling point. It's an odd move, considering that other companies have learned the hard way that consumers don't respond well to this message. And yet Apple strongly emphasized its wallet's use of tokenization, dynamic data and the phone's secure element, as well as a system for disabling Apple Pay remotely if the phone is ever lost.

Apple also incorporates the phone's Touch ID fingerprint scanner to authorize a payment — a process that looks like either overkill or security theater, given the abundance of other security measures in place.

But Touch ID may be a stroke of marketing genius, and the one thing that convinces consumers to finally dump plastic cards in favor of mobile payments. A steady stream of data breaches from major retailers including Target, Neiman Marcus and Home Depot have eroded consumers' trust in merchants' ability to keep their payment data secure. It's likely that a consumer who shops at these stores has had his or her card replaced at least once this year.

Touch ID may be redundant, it may be easy to fool, and it may not even be mandatory (Apple Pay will also work on the Apple Watch, which doesn't have a fingerprint sensor). But Touch ID provides consumers with a tangible sense of security that plastic cards — even EMV-chip cards — do not offer. It feels high-tech and science-fictiony to use fingerprint authentication.

But fingerprint-based payment technology is still a gamble. Biometric payment systems have been tried before, and  have not fared well. Pay By Touch placed biometric fingerprint readers at the point of sale in the pre-iPhone era, but these efforts were short-lived. Biometric payments have since resurfaced in tanning salons and Discover's headquarters, but these projects are few and far between.

Apple will also be challenged because, until this point, the company has not been a poster child for security. Even before the recent leak of celebrity nude photos was linked to Apple's iCloud service, the company faced heat for its lax method of approving in-app purchases. Apple agreed to a $32 million settlement with the Federal Trade Commission this year to resolve its practice of authorizing digital content sales to minors without parental consent.

But Apple's marketing can seemingly overcome any setback, and perhaps its master stroke was one that is not obviously tied to payments.

Apple offered up a free U2 album over iTunes at the end of its iPhone 6 event, and in doing so, Apple is subtly asking its customers to log into iTunes to make sure their Apple account credentials are up to date. This will reduce friction for anyone coming into the Apple ecosystem ahead of Apple Pay's launch.

Daniel Wolfe is Editor-in-Chief of PaymentsSource.

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