Apple Tap to Pay makes iPhone a payment terminal

Apple has introduced a Tap to Pay feature that turns the iPhone into a point-of-sale terminal for small businesses.

The feature, unveiled on Tuesday, would let a business use an iPhone XS or device released later to accept payments from contactless credit and debit cards by tapping them with the device. The feature also works with smartphones' digital wallets, including Apple Pay on an iPhone or Apple Watch.

Tap to Pay works with credit and debit cards from the largest payment networks, including American Express, Discover, Mastercard and Visa. To charge the cards, businesses need a mobile app or payment platform supporting the feature.

"In collaboration with payment platforms, app developers and payment networks, we're making it easier than ever for businesses of all sizes … to seamlessly accept contactless payments and continue to grow their business," said Jennifer Bailey, vice president of Apple Pay and Apple Wallet, in a statement.

This spring, Stripe will become the first payment platform to offer Tap to Pay to business customers, including point-of-sale app maker Shopify. Other payment processors and apps will follow later in the year, Apple said.

The stock price of mobile payment processor Block, formerly Square, fell just over 3% after Apple's announcement. The investor reaction might have stemmed from confusion over Tap to Pay's capabilities, said Bob O'Donnell, principal analyst at TECHnalysis Research.

"The early rumors were Apple was going to take over the payment portion of the process, and that would impact [Block]," O'Donnell said. Instead, Tap to Pay passes the transaction to the mobile app or the payment platform on the phone.

The latest feature is one of many that make the iPhone a critical tool for communications, entertainment, work and buying goods and services. Collectively, the capabilities are part of a strategy to make the iPhone, which costs as much as $1,100, "more productive and more useful in more places," O'Donnell said. "It's as simple as that."

Tap to Pay uses near field communication technology to communicate with other contactless devices. Near Field Communication, or NFC -- a short-range wireless connectivity standard -- uses magnetic field induction for communication when devices touch or are within a few centimeters of each other.

Like in Apple Pay, transactions made through Tap to Pay are encrypted and processed using Apple's Secure Element, a chip running the Java Card platform that meets financial industry requirements for electronic payments. Apple does not track what is purchased or who is buying it.

Apple plans to make Tap to Pay available to payment platforms and app developer partners for use in their software developer kits in an upcoming iOS software beta.

Apple built the feature on technology from the $100 million acquisition of Mobeewave in 2020. Apple rivals Google and Samsung also offer digital wallets and payment platforms in their smartphones.

Antone Gonsalves is the news director for the Networking Media Group. He has deep and wide experience in tech journalism. Since the mid-1990s, he has worked for UBM's InformationWeek, TechWeb and Computer Reseller News. He has also written for Ziff Davis' PC Week, IDG's CSOonline and IBTMedia's CruxialCIO, and rounded all of that out by covering startups for Bloomberg News. He started his journalism career at United Press International, working as a reporter and editor in California, Texas, Kansas and Florida.