Apple's New Tap to Pay Feature Turns iPhones into Payment Terminals Without New Hardware Required

Enabling Consumer Purchases From Merchants by Just Tapping Their Phones Together, Apple’s Tap to Pay Also Works with Contactless Credit Cards

“Tap to Pay on iPhone will provide businesses with a secure, private, and easy way to accept contactless payments and unlock new checkout experiences using the power, security, and convenience of iPhone.”

— Jennifer Bailey, Apple's VP of Apple Pay and Apple Walle

What is Tap to Pay?

Initially revealed during the second iOS 15.4 developer beta, Tap to Pay is a new feature from Apple that turns compatible iPhones into payment terminals without additional hardware requirements. Tap to Pay simplifies financial transactions on mobile devices without requiring other hardware like Square’s dongle to initiate contactless payments via iPhones.

Currently, Tap to Pay supports consumer purchases directly with businesses only and does not support person-to-person payments. Using Tap to Pay, a consumer places an iPhone or Apple Watch near the business iPhone to complete payment. Transactions are secure, private and use NFC technology.

Previously in 2020, Bloomberg reported that Apple had acquired a startup Mobeewave that was building out this technology. Fast forward to today, where Apple has confirmed the feature and is rolling it out. Tap to Pay is Apple’s latest financial innovation. It joins a coterie of highly successful services such as Apple Pay, a contactless payment service, Apple Pay Cash, a peer-to-peer payment service, and Apple Card, a credit card specifically designed for use on the iPhone in collaboration with Goldman Sachs.

Highlights:

Contactless payments on mobile devices
No additional hardware requirements
Employs NFC technology
Takes payments from contactless credit and debit cards and other digital wallets
Accepts Apple Pay, Visa, American Express, Mastercard, and Discover
Currently available for US markets, consumer to business

What do you need for Tap to Pay?

Initiating Tap to Pay only requires two iPhones — one from the consumer and one from the business enabled to accept Tap to Pay contactless payments and a supporting payment platform, available via an iOS app. A consumer can buy from a company by tapping the two iPhones together.

Tap to Pay supports iPhone XS and later models. The first payment platform to use Tap to Pay is Stripe, now available through the Shopify Point of Sale app. Rollouts of other payment platforms will probably occur soon. Apple has also shared that the new feature will support all EMV contactless payments, including Google Pay.

How does Tap to Pay work?

When the merchant and customer are ready to checkout, the merchant will ask the customer to hold an iPhone or Apple Watch by the merchant’s iPhone to pay. Payment options include Apple Pay, their contactless credit or debit card, or another digital wallet near the merchant’s iPhone. Payment occurs seamlessly, securely, and privately via NFC technology.

By eliminating hardware, a business of any size - whether it is a freelancer, solo entrepreneur, small business, or big business -can process financial transactions at any time, anywhere. In addition, today, Apple Pay is also accepted by over 90 percent of American retailers. Therefore, any business of any size can use this feature in the upcoming months as the technology rolls out to the App Store in the spring and becomes available at major retailers, payment platforms, and Apple Store locations in the US this year.

“Whether you’re a salesperson at an internet-first retailer or an individual entrepreneur, you can soon accept contactless payments on a device that’s already in your pocket: your iPhone. With Tap to Pay on iPhone, millions of businesses using Stripe can enhance their in-person commerce experience by offering their customers a fast and secure checkout.”

— Billy Alvarado, Stripe's Chief Business Officer

Tap to Pay protects payment data with the same technology Secure Element employed by Apple Pay. Apple also does not receive any information about the details of what consumers are purchasing.

When is Tap to Pay available?

Tap to Pay is currently available to developers via iOS 15.4 beta and is expected to be released to the public this spring with iOS 15.4. Initially, the feature will be available only in the United States.

What does this mean for Square and its Dongle?

Tap to Pay enables businesses to accept payments from customers without the need for additional hardware, turning the iPhones into point of sale devices themselves. Given its efficiency and ease of use, Tap to Pay challenges Square with its ubiquitous dongle, effectively eliminating the need for Square’s additional hardware to process payments.

Apple Roars Ahead with $123.9B Quarter, Surpassing Sales Targets, with the Popularity of the new iPhone 13 and Services

Showing us all how it's done, Apple $AAPL roars ahead on the popularity of the iPhone 13 with $123.9 B in revenue, its highest yet, surpassing sales targets on every product line, bar iPads.

Image via Apple

Dialing it up

Soaring by 11 percent for the quarter, Apple clocked in at $123.9 billion for its first quarter, its highest quarterly earnings yet, flying past investor and industry expectations and outselling sales goals in every category, bar its iPad product line. Supply chain hurdles created by bottlenecks during the pandemic accounted for the holdup on iPads as demand has still been insatiable.

“This quarter’s record results were made possible by our most innovative lineup of products and services ever. We are gratified to see the response from customers around the world at a time when staying connected has never been more important. We are doing all we can to help build a better world — making progress toward our goal of becoming carbon neutral across our supply chain and products by 2030, and pushing forward with our work in education and racial equity and justice.”

— Tim Cook, Apple CEO

Live on January 27, 2022, Apple’s Investor webcast for Q1 2022 is available for two weeks after. Here are the consolidated statements (PDF).

Apple CEO Tim Cook in Los Angeles, CA. © Lucy Nicolson, Reuters

Improvements in Supply Chain

When Apple introduced its own Apple chip (M1 series) for its MacBook Pros, its highest performing asset during the fourth quarter of 2021, the company eliminated a major supply chain bottleneck and logistical constraint, removing its dependence upon Intel. The last quarter of 2021 also included holiday sales. Apple has faced some bottlenecks with semi-conductor chip supply for ‘legacy nodes,’ during the pandemic, like all businesses and industries that require these silicon components for their products. Nonetheless, the company has done very well in taking control of its business supply chain. Despite supply chain bottlenecks, Apple still increased iPhone sales by 9 percent — an accomplishment the company is proud of.

What’s the difference between ‘leading edge’ chips and ‘legacy node’ chips? Leading edge chips consist of the robust processors required to drive the iPhone’s core functionality while ‘legacy node’ chips consist of simpler, less sophisticated parts to manage power or run displays.

Taking into account uncertainty due to the pandemic, Apple has not provided estimates for the next quarter. However, Apple CEO Tim Cook did say that the supply chain is improving in an interview with Julia Boorstin of CNBC, which she shares during CNBC’s Squaw Box. Apple CEO Tim Cook also told CNBC that Apple was inevitably facing inflationary pressure as it could not be avoided.

“What we expect for the March quarter is solid year-over-year revenue growth. And we expect supply constraints in the March quarter to be less than they were in the December quarter.”

— Tim Cook, Apple CEO

Quick Breakdown of Category Sales

In September 2021, Apple released new iPhone models. The last quarter of 2021 offered up insight on iPhone 13 sales, given that it was the first reporting and sales cycle, with strong demand, up 9 percent to $71.63 billion.

Other areas of Apple’s business grew at faster rates such as Services that includes iCloud, Apple Music, App Store fees and search licensing up to 25 percent for the year to $19.52 billion. Services have become Apple’s most profitable business sector unit. Other product categories such as the Apple Watch including the Series 7 Watch and AirPods (newer version) each grew by 13 percent over the year.

Macs led Apple’s hardware sales, growing 25 percent to reach $10.85 billion, including the well-received MacBook Pro models at $1,999 apiece featuring the new Apple chip.

While iPad sales did not meet investor analyst estimates, Apple CEO Tim Cook explained that while demand was high, Apple was unable to make sufficient iPads due to large supply chain constraints.

Lifting Up the Dow and S&P

Just three weeks ago, Apple became the first company to reach a $3 trillion market value, lifting up both the S&P 500 and Dow to record closing highs. The company closed out 2021 beating estimates by Factset.

Turning iPhones into Cash Payment Terminals

Citing anonymous sources, Bloomberg reports that Apple intends to turn iPhones into direct cash payment terminals, enabling merchants to accept payments via a tap of a credit card or another iPhone and without requiring additional hardware. Apple’s privacy-enabled Apple Pay has been hugely successful and with the iPhone already offering versatile functionality and reaching users worldwide, this payment option can further simplify the payment process for many merchants. It also could put Apple into direct competition with Block-owned Square known for its ubiquitous square-shaped device that pulls into existing smartphones and tablets to enable payment processing.

In 2020, Apple paid $100 million for Mobeewave to build out this functionality. Mobeewave was a Canadian startup that developed technology for smartphones to accept payments with just a tap of a credit card. The new payment system is expected to use the iPhone’s NFC or near field communications chip that is used for Apple Pay.

Apple Becomes First Publicly Traded Company With a $3 Trillion Market Valuation

During Market Trading, Apple Briefly Hit a $3T Valuation on Monday

Reaching a trillion valuation is no small feat, yet Apple has now hit a market cap of three times that amount today briefly during trading hours with a share price at $182.86. Considered mostly symbolic as the valuation dropped below soon after, Apple’s $3 trillion market valuation nonetheless clearly demonstrates investor recognition and appreciation of the Cupertino giant’s continued success. Apple closed the day at $182.01, just shy of $3 trillion with a 2.5 percent rise in valuation.

Over the last few years, Apple has consistently experienced record-breaking growth across product lines for several quarters. The company’s high liquidity, strong balance sheet and consistent, abundant cash flow through its Services and popular hardware product lines, makes the stock more appealing during market volatility. The company also continues to invest in new products, buy back stocks and provide regular dividends to shareholders. Over the past year, Apple’s stock went up 34 percent.

Peers like Microsoft, Amazon and Google are not far behind, with Microsoft worth approximately $2.5 trillion, Google just under $2 trillion and Amazon at $1.75 trillion. Apple continues to be a favorite investment for Warren Buffett, who has increased Berkshire Hathaways holdings in the tech giant, with a 5 percent stake in 2018. Monday’s gain increased his investment from $36 billion to $120 billion, making it one of his best decisions to date, and now accounting for 40 percent of his equity portfolio, according to CNBC. Apple also consistently pays out dividends that Berkshire Hathaway has enjoyed, receiving over $775 million annually.

Over its fourth quarter in 2021, Apple benefited from growth across all product categories, with over 29 percent growth year over year. Apple sold 27 million pairs of its newest AirPods over the holiday season, bringing its total to 90 million AirPods in 2021. These sales indicate 20 percent year over year growth in revenue, according to top Apple analyst, Ming-Chi Kuo of TFI Asset Management Limited, shared by CNBC.

Previously, in August 2018, Apple became the first publicly traded U.S. company to hit a $1 trillion market cap followed just two years later, by crossing the $2 trillion valuation in August of 2020.