Fraud Hits Apple Pay, But It’s Secure

By: Robert Siciliano  |  April 21, 2015

Apple Pay

You may want to rethink what you currently think about Apple Pay and security if you’re thinking that it’s riddled with insecurity. Thus far, this platform hasn’t been hit by hackers in a way that results in large-scale credit card fraud.

On the other hand, another type of crime—identity theft—is easy to commit with the iPhones when crooks buy them with stolen credit card data, then load them with that data. And Apple can’t do much to help banks detect these thieves, who often buy the phones at Apple stores.

How Apple Pay works is that the user’s bank approves adding their credit card to the iPhone, but the information that the bank receives can easily mask a thief. And the verification process varies from bank to bank.

A definitive rate of fraud on Apple Pay has not been determined, but it’s estimated to be $6 per $100 spent—which is six times more than fraud involving magnetic strip cards. But even this estimate isn’t carved in stone. The fraud rate will vary among the banks—whatever that rate range actually is.

The root of all this “Apple Pay fraud” is all the credit card data breaches. Criminals resell this data on the black market and load it onto iPhones. Banks used to issue new cards when their data was breached. But today, more often, they “see what happens” and bet the users card will expire before the criminals can use the data.

So who’s more at fault with this fraud—Apple or the banks? Of course, Apple points to the banks as being responsible for the verification and approval process. And banks see only the information that they get from the Apple user. Sometimes the approval process is 1-2-3 and you’re good to go, while other banks require additional information from the user.

At any rate, Apple Pay is proving to be a major force in mobile payments, and there’s really no reason to be fearful that using this platform will be detrimental to the user in the same way that using a credit card can be.

If your card was a part of any recent data breaches it is up to you to pay attention to your account activity. Go to your banks web and sign up for alerts and notifications so you are made aware of every transaction in real time.

Robert Siciliano is an identity theft expert to discussing  identity theft prevention. Disclosures.

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