Mobile

Apple Pay is coming to Starbucks, Apple exec says

The head of Apple Pay says the coffee shop will start piloting the mobile payments service this year and roll it out to about 7,500 stores next year. It's also heading for KFC and Chili's.

Jennifer Bailey, head of Apple Pay, talks about the service's rollout with Recode's Ina Fried. Shara Tibken/CNET

HALF MOON BAY, Calif. -- You'll soon be able to pay for your Starbucks latte with your Apple Watch, as well as your KFC chicken and Chili's Southwestern egg rolls.

Apple Pay, Apple's mobile payments service, will be coming to Starbucks over the next year, Jennifer Bailey, vice president of Apple Pay, said here during the Code Mobile conference. Starbucks will start piloting the service in some stores by the end of 2015 and will roll it out to Starbucks' company-owned stores -- about 7,500 -- next year.

"I have to say in the last year of working on Apple Pay, we've sees a sea change in momentum around acceptance at the merchant level," Bailey said, adding that about 80 percent of Apple Watch owners "very actively" use Apple Pay. Apple Pay will hit KFC restaurants in the spring and Chili's restaurants in 2016 as a "pay at the table" model, she said.

The promise of turning smartphones into true digital wallets -- including the ability to pay at the register -- has been hyped for years. Apple jump-started consumer interest in the technology last year when it launched its first venture into contactless mobile payments. Less than 72 hours after Apple Pay's debut, 1 million credit cards had been used on the service.

Using a newer iPhone or Apple Watch, people can pay for items on the go at supported retailers via near-field communication (NFC) technology. Other Touch ID-enabled devices, such as the iPad Air 2 and iPad Mini 3, could pay for in-app transactions too, and the iOS 9 update from last month lets users consolidate loyalty and rewards cards.

The service use a tokenization system that sends an encrypted digital token to stores instead of a credit or debit card number each time a transaction is made, meaning merchants and retailers never see customer data. Samsung's mobile payments service works the same way.

Apple Pay went live in 2014 with about 500 financial-institution partners and 220,000 US merchant locations that take mobile payments via NFC's short-range, secure wireless capabilities. As of the middle of 2015, more than 2,500 banks had signed on to support Apple Pay, and more than 1 million locations accepted Apple Pay.

Apple Pay is on track to be accepted at over 1.5 million US locations by the end of the year. In January, Apple said Apple Pay made up more than two-thirds of all contactless payments, which includes any device or smart card that makes payments using a radio frequency.

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But Apple faces increased competition from the likes of Google, which has been bulking up its Android Pay offering, and Samsung, which introduced its Samsung Pay service in the US late last month. Samsung's service, which lets users pay for items with their Galaxy phones and the upcoming Gear S2 smartwatch, works at older retail terminals that don't accept Apple Pay thanks to its acquisition of LoopPay in February.

Meanwhile, Bailey on Thursday said she's been treated well as one of the few female executives at Apple, but the company knows it needs to do more to recruit women and other minorities. Bailey was one of two female executives highlighted on stage during Apple's developer conference in June.

Until that event, only two women had spoken during a WWDC keynote since 2007 -- and none were Apple employees. CEO Tim Cook has made a point of saying Apple will be a "better company" by being more diverse.

"My own experience has really not changed over the years," she said. "It has always been a place I don't feel I'm treated differently because I'm a woman. Having said that, I think we readily sort of see the issues in terms of not enough women in technology. Apple has a number of initiatives under way to really work on that."

Updated at 2:35 p.m. PT with details about KFC, Chili's and the UK.

Updated at 3 p.m. PT with details about diversity at Apple and Apple Pay usage on the Apple Watch.