Apple Pay to land with iOS 8.1 next week

Apple's new NFC-based payments service will arrive with the company's first major update to its most recent operating system, iOS 8.1, next Tuesday.

At its unveiling of several new products today, Apple announced iOS 8.1 was currently in beta and would be released on October 21 Australian time.

The contactless payment system that Apple teased at its launch of the iPhone 6 last month, Apple Pay, will become formally available when the update to the mobile operating system lands.

However, the company is still yet to confirm whether the service will arrive in Australia - for now Apple Pay will only be available for users in the United States.

Apple has partnered with the three major payments networks - American Express, Visa and Mastercard - alongside a number of US banks and retailers to offer the service.

The system - which is only currently available in Apple's new iPhone 6 models - involves an embedded NFC chip, a secure element to store encrypted payment details, Apple’s TouchID fingerprint technology, and its existing Passbook application.

Older iPhone users wanting to take advantage of the payments solution will need to buy an Apple Watch and pair it with their iPhone, which will not go on sale until early next year.

For Apple's new iPad Air 2 and iPad mini 3, which lack NFC functionality but include the necessary TouchID fingerprint scanner, Apple Pay will be available for online shopping only.

The iPhone uses NFC technology to detect a compatible merchant terminal at point of sale, at which point the user is prompted for payment and asked to choose which account (stored within Passbook) to pay with. The user then authenticates the transaction with their fingerprint.

Each Apple Pay transaction generates an individual "dynamic security code" to keep the buyer’s personal details and credit card numbers obscured from the retailer.

This approach prevents the data from being exposed should Apple's NFC communication be compromised and accessed by outsiders.

Once the device and point-of-sale terminal have both been authenticated, Apple Pay transfers the secure code and user credentials, which are then verified by the merchant when its systems connect to a payment network subsystem.

iOS 8.1 will also re-introduce the 'camera roll' function that was removed from iOS 8, as well as a new 'iCloud photo library' which will allow users to either backup their photos to iCloud or use it as a primary storage solution.

The update will support 'SMS Handoff' - one of a series of Apple's new 'continuity' features - which allows other iOS 8.1 devices as well as Macs running the new OS X Yosemite operating system to receive and respond to texts and iMessages.

iOS 8.1 will be available for download either over-the-air or through iTunes from Tuesday Australian time next week.

The release of iOS 8 was marred by technical issues which forced Apple to release the 8.0.1 fix merely a week after the operating system launched.

But the 8.0.1 version introduced more bugs - including connectivity issues to mobile networks and the TouchID fingerprint scanner failing to work on the new iPhone 6 devices - and Apple was again forced to act quickly to recall the update and push out 8.0.2 just one day later.