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Will Apple’s new Pay technology kill the credit card?

The tech giant Apple has announced its entry into the payments market with the launch of Apple Pay, potentially meaning you no longer need to take your wallet or purse with you.

Apple’s new iPhones have a near-field communications (NFC) chip embedded inside – joining the ranks of loads of Android phones that already have those chips. But Apple has also introduced Apple Pay, which allows iPhone 6 and Apple Watch users to use their phone to make payments, rather than credit or debit cards.

An estimated 500 million people already have their credit card details stored on iTunes – this just takes it to the next step. New cards can be added by taking a picture of them. But Apple is not out to challenge the dominance of Mastercard, Visa or American Express – instead the company has partnered with the payment giants. Combined, they account for an estimated 91% global market share of purchase transaction in 2013. For its troubles, Apple will receive a small percentage fee per transaction.

Apple Pay will even work with online payments – and will compete with Ebay’s Pay Pal payments service, although analysts estimate less than 0.5% of Pay Pal’s revenue is at stake from Apple Pay.

On the up side, Apple’s technology could be a major win for Mobile Embrace Limited’s (ASX: MBE) mobile payments offering. Mint Wireless Limited (ASX: MNW) has noted that NFC is great news for the company – making it easier for customers to make payments on the go.

Apple says Apple Pay is already available in more than 220,000 stores which accept contactless payments and more will be added over time.

Australia’s banks could also be big winners – allowing retailers to accept payments on their phones without needing a credit card reader. Westpac Banking Corporation (ASX: WBC) currently charges merchants $100 for each card reader to use their Mobile PayWay technology, while Commonwealth Bank of Australia (ASX: CBA) charges from $30 to more than $150 per month for a mobile EFTPOS terminal that can accept payments from mobile devices. Those terminals/card readers as well as physical credit cards could soon be going the way of the dinosaur.

*EDITOR’S NOTE: In the previous version of this article, we noted that Apple’s technology was a threat to Mobile Embrace and Mint Wireless. This was incorrect – neither company will compete with Apple Pay.

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Motley Fool writer/analyst Mike King owns shares in Apple. You can follow Mike on Twitter @TMFKinga

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