NFC is a set of standards for mobile devices to establish radio communication with each other by bringing them into close proximity, usually no more than a few centimeters.
Albeit, NFC isn't a new mobile technology, Apple's Watch, iPhone 6 or 6 Plus brings the secure element and the NFC chipset, as core hardware. And Apple is the first vendor to support this new payment system.
Apple Pay initializes a connection to the payment network or issuing bank associated with your card, which then provides a Device Account Number, known as tokenization.
Tokenization, as a security structure, replaces a sensitive piece of data (credit card number) with a random data that has the same formatting. It is handled by the payment network, which encrypts the credit card number, sends it back for the token, and provides that to the merchant to keep for things like refunds or customer tracking.
Unlike Google Wallet, in which Google stores your card on its own servers and mediates and records all transactions with the payment networks. Apple doesn’t store a user's card locally, neither does it track your transactions, and your privacy is protected.
While, Apple Pay is certainly not the first mobile payment system, Apple is poised to shake things in the mobile payment scene, for some obvious reasons.
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