Apple Pay is going to change the way you pay (eventually -- maybe)

“Apple Pay is going to be huge,” Apple CEO Tim Cook said last week. “It’s going to change the way we pay for things.”

Well, maybe. They key phrase is going to. Someday.

The good news
Technologically speaking, Apple has knocked this one out of the park. Apple Pay is the best thing Apple’s done in years.

Imagine that a cashier has rung up your purchase. Here’s the moment when you’d usually pull out your credit card. Now, with Apple Pay, you hold your iPhone near the card reader with your thumb resting on the home button.

The phone wakes, beeps, vibrates, and shows a picture of your credit card (minus the number). That means you’re done. You’ve paid. You can leave.

The whole thing doesn’t even take two seconds. I bought stuff in four stores without a glitch. I never had to sign anything, either (although I’m told that some shopkeepers sometimes insist on a signature anyway).

Security
But Apple Pay is not only faster than swiping a credit card — it’s also much, much more secure.

You know all those breaches recently? Target, Home Depot, Staples? All those card numbers were stolen from the stores. If you could prevent your credit card number from sitting in the store’s database, then bad guys couldn’t steal it.

That’s how Apple Pay works. The store never sees, receives, or stores your credit card number. Instead, the phone transmits a temporary, one-time, encoded number that means nothing to the merchant. It incorporates verification codes that only the card issuer (your bank) can translate and verify. (Google Wallet works this way, too.)

In other words, the merchant never even encounters your credit card number. Or your name, for that matter.

Online apps
Once you’ve got Apple Pay going, you can also buy stuff from online merchants’ apps with your fingerprint — just not from websites like Amazon.com and BestBuy.com.

This aspect sounds great, because who isn’t sick of entering name, address, and credit card information over and over again online?

At the moment, though, it’s only a fledgling idea. Not even 20 apps accept Apple Pay at the moment. I tried buying stuff with the apps from Houzz.com and Fancy.com, which both worked fast and great: I just tapped the Pay with Apple Pay button at the checkout moment.

But, man, we need more than 20 apps to make this worth it.

The challenges
So, yeah, Apple Pay is fast and secure and brilliantly designed. But it has a tough slog ahead.

The phone challenge. Apple Pay requires an iPhone 6 or 6 Plus, because only those phones contain the necessary NFC (near-field communications) chip, as well as a special encryption chip that stores and runs the Apple Pay codes. Older phones lack these two special bits of circuitry.

Future: bright. If all future iPhones aren’t Apple Pay-ready, I’ll eat my hat.

The card challenge. Apple Pay works with Visa, MasterCard, and American Express — but so far, it doesn’t work with corporate cards (those issued by your employer) or prepaid cards. It doesn’t work with proprietary credit cards issued by chains like Macy’s or Bloomingdale’s, either.

Future: murky. Apple says it’s exploring possibilities.

The bank challenge. Right now, Apple Pay works only with cards issued by Bank of America, Chase, Citibank, CapOne, JPMorgan, Merrill Lynch, U.S. Trust, and Wells Fargo.

Future: bright. Apple says that 500 more banks’ cards will become compatible in the upcoming months.

The merchant challenge. A store can’t accept Apple Pay unless it has a “contactless” (wireless) card reader. Right now, that’s about 220,000 shops, including McDonald’s, Whole Foods, Subway, Office Depot, BJs, Toys ‘R’ Us, Panera Bread, Macy’s, Bloomingdale’s, Foot Locker, Nike, Sports Authority, RadioShack, Duane Reade, Walgreens, and others. More are coming online soon.

But that’s 220,000 — out of the 8 million businesses that can take credit cards in America. Don’t leave your credit cards at home yet.

Future: On one hand, the future is bright. Next year, America is finally adopting a new, more secure kind of credit card, called EMV (Europay-MasterCard-Visa). It’s the kind they already use in Europe, the kind with a chip, the kind that can require you to type a security code to confirm purchase, the kind that would have prevented the Target or Home Depot card thefts.

To prepare for the EMV revolution, thousands of U.S. merchants are already planning to upgrade their card-reading systems — which will become Apple Pay-compatible in the process.

The Apple Pay future
At the moment, then, Apple Pay works in only a subset of a subset of a subset of a subset of transactions.

The good news for the future is that Apple seems to have engineered a win-win-win-win system. You win, because paying for stuff is faster and more secure than using credit cards. The credit cards and banks win, because they make more money from transaction fees. Merchants win, because anytime you take the friction out of buying, people buy more.

And, of course, Apple wins, because it gets a few cents from every transaction.