Eddy Cue: Here's how Apple Pay works on an Apple Watch

The exec in charge of Apple Pay tells CNET at a Golden State Warriors game that the mobile payments service will work on the company's new smartwatch as long as the device has been unlocked with a passcode or through an iPhone.

Shara Tibken Former managing editor
Shara Tibken was a managing editor at CNET News, overseeing a team covering tech policy, EU tech, mobile and the digital divide. She previously covered mobile as a senior reporter at CNET and also wrote for Dow Jones Newswires and The Wall Street Journal. Shara is a native Midwesterner who still prefers "pop" over "soda."
Shara Tibken
6 min read

Eddy Cue, Apple's head of Internet software and service (left), and Rick Welts, president and chief operating officer of the Golden State Warriors, talk up their new partnership on Apple Pay at Oracle Arena in Oakland, Calif. Shara Tibken/CNET

OAKLAND, Calif. -- iPhone 5, 5C and 5S owners, you're in luck.

Just like those iPhone 6 and 6 Plus owners, all you'll have to do is enter a passcode or unlock your Apple Watch with your phone to use Apple Pay, explained Eddy Cue, head of iTunes, Apple Pay and Apple's other Internet software and services businesses.

When Apple announced the Apple Watch in September, it said the device would support Apple Pay and would also make the iPhone 5, 5C and 5S work with the mobile payments service. But it didn't provide many details as to how.

But on Friday, as Apple announced Apple Pay's availability here at Oracle Arena before a Golden State Warriors basketball game, Cue explained how the service will work on Apple Watch via iPhones.

Apple Pay works in iPhones by letting users simply tap their smartphone to payment terminals and then touch their devices' TouchID fingerprint sensors to purchase items. Both the smartphones and the terminals must have near-field communication (NFC) chips that store payment credentials -- something that limited the service to the new iPhone 6 and 6 Plus phones (unless you have an Apple Watch, it turns out).

Apple Watch also has an NFC chip that makes mobile payments possible, but the watch itself doesn't have TouchID. Instead, users have to either enter a password on the watch or touch their fingerprint sensor on their iPhone after they've put on the wearable, which unlocks Apple Watch. Users won't have to type a password every time they want to use Apple Pay, though. As long as they haven't taken off the device after pairing it with their phone or entering a password on the watch, it will remain unlocked, Cue said.

"You can [type a password] if you want to, but you won't normally have to," Cue said. "Right now the watch is unlocked, and I could do all of it without having to type any code. If I [took it off and] handed it to you, now you'd have to type in a security code or unlock it from your phone."

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Owners of Apple's older phones that don't have fingerprint sensors or NFC will still be able to use Apple Pay through their Apple Watch, Cue said. All they'll have to do is type in a passcode on their watch or phone while wearing Apple Watch, unlocking the device. Apple started incorporating TouchID in iPhones starting with the iPhone 5S in September 2013. Apple Watch requires an iPhone 5, 5C, 5S, 6 or 6 Plus.

"You don't have to authenticate on the phone," said Cue, who was wearing the stainless steel Apple Watch with black strap -- the company's midrange smartwatch model. "Your watch has to be unlocked, and your phone can unlock your watch. If I took my watch off and gave it to you, it would know and no longer work. If I wanted to pay right now, I could pay with the watch and not have to take the phone out of my pocket."

The information about Apple Pay on Apple Watch comes only a few days before Apple reveals more details about its smartwatch during an event Monday at the Yerba Buena Center for the Arts in San Francisco. The company is expected to talk up apps and other features of the watch, as well as show off new Macintosh computers and possibly some software items.

For Apple, it's key to expand beyond its current iPhone franchise. The company is more reliant on its smartphone than ever before, with about 70 percent of its December quarter sales coming from the device. It has looked to Apple Watch and Apple Pay as new products with strong potential, and it also is exploring ways to revitalize its struggling iPad business.

The Apple Watch comes in two sizes, 42mm or 38mm, and three designs: the aluminum-cased Apple Watch Sport, stainless-steel-cased Apple Watch and the 18-karat-gold-cased Apple Watch Edition. There also are a variety of bands that can be easily swapped, including a Milanese loop of metal mesh with magnets and a leather band that auto-attaches. The company will reveal more pricing and availability details Monday but has said Apple Watch will start at $349 and will hit stores next month.

Apple Pay Warriors

Cue, a longtime Golden State Warriors fan, offered the explanation about Apple Pay on the Apple Watch ahead of the basketball team's game against the Dallas Mavericks. The Warriors have started to implement Apple Pay into retail stores at the arena and will have a full rollout next season. The team also is looking at expanding Apple Pay to concession stands in the arena, as well as potentially letting fans order and pay for items while in their seats, said Rick Welts, chief operating officer and president of the Warriors.

The Warriors have had a long partnership with Apple. The team, which will open a new stadium in San Francisco in 2018, has been using its nearly 50-year-old venue in Oakland as a sort of petri dish to try out new technology. Some, like the use of Apple's iBeacon technology, have stuck. Others will be tested only in parts of the stadium before being rolled out in the new venue, while some tech may be scrapped after the trials.

Watch this: Inside Scoop: Watches and what else to expect from Apple on March 9

The Warriors, while not as early with some technological advancements as other sports franchises, last March became the first NBA team to install beacons in its arena. Apple's iBeacon technology, first released with the iOS 7 mobile software in 2013, uses low-energy Bluetooth to send notifications to smartphone users located near the beacon. It has popped up at retailers and other sports arenas, giving organizations a fast way to interact with customers and fans.

As for Apple Pay, the service has another component that doesn't require an NFC chip but does need the company's TouchID. People now can pay for items in apps using a single touch on their device's fingerprint sensor, something that saves time and does away with the hassle of entering credit card and address information over and over. Previously, Apple allowed consumers to use the fingerprint sensor to quickly buy content just from its iTunes, App and iBooks stores.

Apple Pay launched in October with about 500 financial-institution partners and 220,000 US merchant locations that take mobile payments via NFC's short-range, secure wireless capabilities. Since that time, it has added new partners like the federal government to use Apple Pay in National Parks and USA Technologies to use the technology at parking meters, laundry machines and vending machines.

In January, Apple said Apple Pay made up more than $2 out of every $3 spent on purchases using contactless payments. (Contactless payments cover any devices -- smartcards included -- that make payments using a radio frequency.) And in February, Cook said more than 2,000 banks and credit unions, about 90 percent of the US market, accept Apple Pay. The number supporting the service, quadruple the number of partners at launch, grew "much faster" than expected, Cook said. He has said that "2015 will be the year of Apple Pay."

Correction, 11:50 a.m. PT: The original version of this story said there was an option for Apple Watch users to choose a stronger security setting that requires a password be entered each time they want to use Apple Pay on the device. That's not the case. Users enter a password once, when putting on the watch.

Correction, 4:45 p.m. PT on March 9: Fixed the last name of the Warriors' president.

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