Apple Pay technology will do much more than retail payments

People who see Apple Pay as just another way to make payments in retail stores are missing the big picture.

In addition to letting people pay for items with a wave of their iPhone 6 or Apple Watch, the near-field communications (NFC) chip in those devices has many more applications, Susquehanna Financial Group analyst Chris Caso said in a report Tuesday. Those apps include unlocking hotel room doors, checking out library books and riding transit systems, he said.

"Those who have been following NFC technology for a while know that payments is only one application of this technology," Caso said. "We think transit payments are likely to be one of the next features added to Apple Pay. That's because the NXP (NASDAQ:NXPI) silicon included on iPhone is essentially the same silicon used on transit payment cards (such as the Chicago "L" and most transit systems in China)."

Some applications will require you to use Apple's (NASDAQ:AAPL) Touch ID fingerprint reader to prove who you are, he said. Those apps including checking out a library book, a ZipCar or unlocking your front door, Caso said.

"W Hotels has already announced that they will develop an app to allow the NFC in iPhone and Apple Watch to replace room keys," he said. "We think Apple is likely to move cautiously on applications such as these to avoid privacy concerns, but we think they are possible."

Caso believes Apple Pay will be a hit as a digital wallet. It's a much better solution than Google (NASDAQ:GOOGL) Wallet, he says. Apple Pay is more secure than credit cards and has already lined up leading retailers to accept it, Caso noted.

Apple Pay supports credit and debit cards from the three major payment networks: American Express (NYSE:AXP), MasterCard (NYSE:MA) and Visa (NYSE:V).