New iPhone 5S will read your fingerprints

Alistair Barr | USA TODAY

Show Caption Hide Caption See Apple's new iPhone 5S fingerprint sensor Apple's new iPhone 5S features fingerprint identity sensor technology that allows you to unlock your phone using your fingerprints.

Apple releases cheaper iPhone 5c%2C in addition to a high-end 5s

Fingerprint technology could lead to secure mobile phone payments and more

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Biometric sensors will soon be on all smartphones%2C PayPal president predicts

SAN FRANCISCO — Apple's latest iPhone has fingerprint authentication, a major new technology that could give the Silicon Valley giant a valuable leg up in big markets such as enterprise computing and mobile payments.

Apple unveiled the iPhone 5s and the lower-cost 5c smartphones during an event at its headquarters in Cupertino, Calif. on Tuesday.

The 5S features Touch ID, which incorporates a fingerprint sensor users can activate to unlock the device or make purchases on iTunes or Apple's App Store.

The top-of-the-line smartphone, on sale September 20, will also offer upgrades to the camera and processors. It has a new "M7" chip specifically designed to handle health-related data and send that information to apps - a possible precursor to a smartwatch and other wearable technology from Apple.

But what gets Wall Street and tech industry insiders excited is the fingerprint technology and the possibilities opened up for Apple by secure, easy authentication of smartphone users' identities.

"Everyone is looking at what this new phone can do, and one of the key things is fingerprint authentication," says Wells Fargo analyst Maynard Um. "People are underestimating what this technology can do."

Um raised his price-range estimate on Apple shares to $525-$575 from $485-$525 on Thursday, partly due to the potential of fingerprint authentication.

The iPhone 5s has the fingerprint technology tied to the home button at the bottom of the device, as this is the first place users touch when they open their phones. Fingerprints added to the device are encrypted and saved to the phone's chip, and users simply touch the home button a few times to unlock their device.

"The swipe and PIN was one of the things Steve Jobs hated. It was in the way of the user experience," says Sebastien Taveau, chief technology officer of Validity Sensors.

Validity Sensors is one of the few leading, independent fingerprint authentication companies around, counting Intel and Qualcomm among its investors. The other, AuthenTec, was acquired by Apple for $356 million in 2012. Since then, Apple has sold some of AuthenTec's other technology while keeping the fingerprint sensor know-how, Taveau noted.

Identifying users through their fingerprints is more secure than passwords and PINs, so this technology could help Apple expand in sectors such as mobile payments and enterprise computing, which demand the highest levels of security, Taveau, Um and others said.

"Within the next two years the vast majority of high-end smartphones will have biometrics and mainly fingerprint logins. It's going to be very useful for payments," says David Marcus, president of PayPal, the electronic-payment division of e-commerce giant eBay.

This year, PayPal helped launch the FIDO Alliance which stands for Fast Identity Online. The group is developing common, open standards for the use of fingerprints and other biometrics to identify users — with the aim of doing away with passwords and PINs. Other members include Google, BlackBerry, Lenovo and Validity Sensors.

Such technology may turn the smartphone into a truly secure way to pay, Wells Fargo's Um says.

Banks and other payment companies may be more likely to develop apps for the iPhone with this new, secure authentication, Taveau said.

"When I touch that icon and it reads my fingerprint, my payment app and account will appear. When my wife touches the same icon on the same device, her app and account will appear," he added.

In the enterprise computing world, fingerprint authentication may help the iPhone and other Apple gadgets become more accepted by company IT departments worried about security, Taveau and Um said.

"Enterprises want to know devices are in the right hands, and this pretty much guarantees it," Um says. "This addresses enterprise security issues for Apple and will open up that market to the company more."

Follow Alistair Barr on Twitter @alistairmbarr