Fraud Comes to Apple Pay

Apple-Getty

Daisuke Wakabayashi and Robin Side report: It didn’t take long for fraud to find its way to Apple Pay

Some banks are seeing a growing incidence of fraud on Apple’s mobile-payment service as criminals exploit vulnerabilities in the verification process of adding a credit card, according to people familiar with the matter.

“The fraud issue was brought to light by Cherian Abraham, a payment expert who works with banks and retailers on mobile-payment strategies, in a blog post in late February. He said fraud “is growing like a weed, and the bank is unable to tell friend from foe.”

Banks are tightening the verification process in an attempt to curb the fraud, these people said, declining to be identified citing a confidentiality agreement with Apple.

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The fraud issue was brought to light by Cherian Abraham, a payment expert who works with banks and retailers on mobile-payment strategies, in a blog post in late February. He said fraud “is growing like a weed, and the bank is unable to tell friend from foe.”

“Stolen identities and lifted credit card numbers are not unique to Apple Pay. Stolen cards have been a problem for a long time in e-commerce transactions, where the rates of fraud are higher than in-store credit card purchases.”

Abraham said it’s not “an anomaly” to see fraud accounting for about 6% of Apple Pay transactions, compared to about 0.1% of transactions using a plastic card to swipe. He noted that fraud rates vary by issuing bank.

An Apple spokeswoman declined to comment on the fraud rates, but said Apple Pay is “designed to be extremely secure and protect a user’s personal information.” She added that “banks are always reviewing and improving their approval process, which varies by bank.”

Stolen identities and lifted credit card numbers are not unique to Apple Pay. Stolen cards have been a problem for a long time in e-commerce transactions, where the rates of fraud are higher than in-store credit card purchases. However, Apple Pay – thanks to its quick and easy checkout process – can combine some of the vulnerabilities of online shopping and the instant delivery of buying a product in store.

Apple Pay has been an early success for Apple. The company said two of every three dollars spent via contactless payments on Visa Mastercard or American Express happened on Apple Pay as of the end of January. Apple is looking to expand the service internationally.

Abraham said other mobile-payment services might be exposed to the same fraud problem, “irrespective of origin, scale, intent or patron saint.”

Apple has gone to great lengths to secure Apple Pay. It uses a “secure element” within the latest iPhones to store the encrypted payment data separate from the rest of phone…(read more)

Digits – WSJ


One Comment on “Fraud Comes to Apple Pay”

  1. agent provocateur says:

    Reblogged this on Nevada State Personnel Watch.


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