How Does Apple Pay Work (A Technical Guide) is reader-supported. When you make a purchase through links on this page, we may earn a commission. See our ethics statement.

Whether you’re buying things or sending payments to your friends, a lot is happening under the hood when you use Apple Pay.

It can be a little technical to understand how Apple Pay works but don’t worry. This guide will explain everything in plain English.

At the end of this guide, you’ll have a clear understanding of what happens when you add a card to the Wallet app and pay with Apple Pay using your iPhone, Apple Watch, or MacBook Pro.

Before we get started, there are some terminologies that you need to understand first.

Payment Processing Terms

  1. Secure Element (SE)
  2. Near Field Communication (NFC)
  3. Tokenization

1. Secure Element (SE)

It’s a special microprocessor chip that stores sensitive data such as payment information. The SE is embedded into the NFC chip found in iPhone 6 and newer, Apple Watch, and MacBook Pro (newer models only).

It’s essentially the same chip that debit and credit cards use to secure your payment information.

2. Near Field Communication (NFC)

NFC is a short-range wireless technology that allows two electronic devices to communicate when placed right next to each other (usually 10 centimeters or less).

Think about your iPhone (certain models), Apple Watch, and POS terminal, they’re all NFC-equipped.

3. Tokenization

It’s a highly secure process that substitutes sensitive data with a one-time algorithmically generated number known as a token.

In context, the Primary Account Number (PAN), or the credit card number, is replaced by a token when you add a card to Apple Pay. In short, a token is just a fake credit card number.

A token holds no value. If it falls into the hands of the bad guys, it’s useless since they cannot reverse it back to the PAN.

How Apple Pay Works

Here’s what happens when you add a card to the Wallet app. Everything happens in a matter of a few seconds.

Adding card to Apple Pay
Illustration when adding a card to Apple Wallet. Herby Jasmin/Gotechtor

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<img src="" alt="Add card to Apple Pay"/><a href="">Infographic</a> by Gotechtor.

To provide a higher level of security than traditional credit or debit cards, Apple Pay uses EMVCo’s contactless suite of specifications.

When you add a credit or debit card in the Wallet app for Apple Pay use, it’s assigned a token (but Apple calls it Device Account Number or DAN). The token is encrypted and stored on a dedicated chip called Secure Element (SE) on your Apple device.

The DAN is specific to an Apple device. If you add your card to another device, it will have a new DAN. This is critical for identity security and fraud protection.

When you complete a transaction with your Apple device at a point-of-sale (POS) terminal, the DAN and a dynamic security code (cryptogram) are sent via NFC, using EMVCo’s contactless suite of specifications.

Creating a new security code with each transaction makes it nearly impossible to replicate your code to use with fraudulent transactions.

This infographic below will give you a visual approach to the behind-the-scenes when someone buys something with Apple Pay.

How Apple Pay works infographic
Illustration of the Apple Pay system. Herby Jasmin/Gotechtor

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<img src="" alt="How Apple Pay works infographic"/><a href="">Infographic</a> by Gotechtor.

Now that you know how Apple Pay works, you might be interested in learning what to do when Apple Pay is not working on your iPhone.

Is Apple Pay Safe to Use?

Simply put, Apple Pay provides one of the most secure payment methods you can use today. However, no payment method is entirely safe from fraud.

Instead of a standard three-digit security code found on credit or debit cards, Apple pay utilizes a dynamic security code.

This generates a security code for each transaction, preventing someone from stealing your card information for their purchases.

Additionally, if you lose your Apple device with Apple Pay activated, you can stop all transactions from the Find My iPhone service.

All you need to do is to place your iPhone in lost mode. Anyway, the thief would need your passcode, Touch ID, or Face ID to make purchases.

Apple has security measures to prevent sellers and third parties from collecting your financial information.

When you make a purchase using Apple Pay, the merchant never sees your data. Additionally, Apple doesn’t store your credit or debit card numbers on the device or its servers.

This ensures that any form of theft or fraud is nearly impossible with Apple Pay.

Does Apple Pay Share Your Data?

During the initial release of Apple Pay, Apple stated they would not track any app usage. They further promised to keep all transactional information between you, the vendors, and the banks.

This means Apple does not store or sell any of your data related to Apple Pay. They have too much at stake for a breach of consumer trust.

If you have any feedback or questions, then please don’t hesitate to leave a comment below.

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Herby has a healthy obsession with all things technology, especially smartphones. He loves to rip things apart to see how they work. He is responsible for the editorial direction, strategy, and growth of Gotechtor.

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