Here’s What Apple’s Newly Opened Touch ID Will Do for Mobile Payments

Source: Apple.com

Apple (NASDAQ:AAPL) introduced many exciting new software features and improvements at its recently concluded Worldwide Developers Conference, including new Continuity and Extensibility features, several Siri enhancements, a HealthKit data storage platform, a Health app, a HomeKit software platform for home automation products, and an entirely new programming language called Swift. However, while Apple’s entry into the connected home market and the healthcare market were widely expected, one of the Cupertino-based company’s unexpected announcements was the opening up of its Touch ID authentication system to third-party developers.

Among the many other developer-end enhancements that Apple unveiled at the WWDC last week was a new Touch ID application programming interface (API). The new Touch ID API allows third-party apps to take advantage of this convenient biometric authentication system. While this API is available to all types of app creators, it may prove to be especially popular for mobile payments service providers such as eBay’s (NASDAQ:EBAY) PayPal or Square, since Touch ID eliminates the hassle of entering passwords to authenticate a purchase. This opens up a huge potential Apple user base for third-party mobile payment services, since the Touch ID system has been widely adopted by iPhone 5S owners.

As noted by Apple senior vice president of software engineering Craig Federighi at the WWDC, less than half (49 percent) of iPhone owners used a passcode before Touch ID was introduced. However, now 83 percent of iPhone 5S owners use a Touch ID/Passcode to secure their devices. In other words, convenience led to higher usage rates. It is quite likely then that the implementation of Touch ID for a mobile payments service will similarly boost the number of users who make purchases through their iPhones.

Although Apple won’t directly profit from the use of third-party mobile payment services on the iPhone, it will still have a beneficial spillover effect on Apple’s ecosystem. The convenience of a Touch ID-based  payment system will drive more users to Apple’s iPhone and associated products even if Apple doesn’t receive a direct cut of a third party’s mobile payment transaction. The overall increase in users will also likely boost the sale of apps and other content that Apple is entitled to get a cut from. The quality of Apple’s fingerprint scanner and the company’s reputation for security may also make the iPhone more appealing as a mobile payments device over its competitors.

While Samsung (SSNLF.PK) Galaxy S5 users can authenticate payments with service providers like PayPal through the device’s fingerprint scanner, various tech reviewers have noted that Samsung’s system is harder to use than Apple’s Touch ID. Reviewers at The Verge called Samsung’s fingerprint scanner, “quite unreliable and virtually impossible to activate when holding the phone in one hand” and noted that “it was very particular about the speed and orientation of the swiping motion used — if we weren’t doing a perfectly straight swipe down, it would refuse to unlock the phone.”

Finally, although third-party apps will be able to use Touch ID as an authentication method, Apple will still protects users’ fingerprint data from outside parties by keeping the information stored in a separate secure enclave in the A7 processor. Over the past several months, multiple media outlets have reported rumors that Apple has been working on some type of new mobile payments service. While it is still not clear if Apple will eventually unveil its own native mobile payments service that will give it a direct cut of users’ transactions, the opening up of Touch ID will likely increase the overall usage of the iPhone as a mobile payments device. Either way, the new Touch ID API will be a boon for Apple and the overall mobile payments industry.

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