Tap-to-pay: Apple introduces new feature that will turn iPhones into payment terminals

Tech giant Apple has introduced a new feature that will transform iPhones into payment terminals.

Bypassing hardware systems such as Block Inc's Square terminals, it will allow businesses to accept credit card and digital payments with just a tap on their iPhones.

"The new capability will empower millions of merchants across the US, from small businesses to large retailers, to use their iPhone" to accept payments, Apple said in a statement.

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Contactless, or tap-to-pay, payment systems have long been popular outside the US as the default way of paying for goods and services. But tap-to-pay has grown in popularity in the US in recent years, particularly during the pandemic when customers and merchants wanted to avoid as much physical interaction with cash and cards as possible.

The tap-to-pay feature will use the iPhone’s existing NFC chip that was being used to transmit payments down to a payment terminal. It will be available to developers via an iOS software update this spring. It will be up to developers and payment-services companies to add the capability to their point-of-sale software.

Stressing on the services privacy feature, the iPhone-maker said it would not know what was being purchased or who was buying it, stressing on the services privacy feature.

It will also give Apple a competitive edge in the growing world of contactless payments, in which the iPhone, as well as Apple Pay, play a dominant role by effectively turning the iPhone into a point-of-sale terminal.

The feature will only be available on iPhones XS or later, Apple said, and will not be available on iPads.

Payments platform Stripe will in the spring be the first to offer the "tap to pay" system to their business customers, Apple noted, with others expected to follow later 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," said Billy Alvarado, Stripe's chief business officer.

"Apple views payments as an important standalone business for the company and they are looking to leverage it," said Shannon Cross, analyst at Cross Research.

"Them venturing into contactless payments is an indication on how important payments are as a business for the company."

The iPhone has been used as a contactless way to pay for goods and services since Apple Pay launched in 2014. But it required merchants to have their own point-of-sale hardware in order to accept contactless payments.

Apple is not the first to turn its flagship smartphone into a payment terminal without requiring additional equipment: South Korea's Samsung launched a similar offer in October 2019.

(With inputs from agencies)