"We've created an entirely new payment process," said Tim Cook. "We love this kind of problem, it's exactly what Apple does best."
The technology is built into every iPhone 6 and iPhone 6 Plus, uses touch ID for security, and stores all of your payment information and store credit cards in Passbook.
"We've got a new chip called the Secure Element," said Apple's Eddy Cue. "It stores all of your payment information encrypted and securely. You can see all of your cards in your Passbook."
"You can use your iPhone iSight camera to take a picture of your card, add all your information, go to your bank and verify that that's your card and we add it right to Passbook."
"We don't store the credit card number and we don't give it to the merchant," he continued. "Each time you pay we use a one-time payment number along with a dynamic security code, so you no longer have a static code on the back of your card."
The technology, which works using a Near Field Communication module, will launch in the US with American Express, Mastercard and Visa, with plans to add more credit cards soon after.
Stores that will accept payment with Apple Pay include Disney, Nike, Whole Foods, Subway, McDonald's and Apple's own stores.
Apps including Target, Groupon and Uber will integrate Apple Pay to provide one-touch checkout.
The technology will be available to developers working in iOS8 on future apps.
More details to follow.