The main pitch of Apple’s pay-by-smartphone feature that was launched in the fall of 2014 was simplicity. What can be easier than waving your iPhone in front of the scanner at the cash register? It saves the customer a lot of fumbling and looking for cards and/or identification.
But Apple Pay was soon responsible for a serious rise in fraudulent transactions via their system, making people question how safe it is to use it. Apple’s mobile payment service is the first one to actually gain real traction among customers, but we might have been too quick to render it as a success.
Cherian Abraham, a payments analyst, gave an alarming estimation of almost 6 percent of all Apple Pay transactions that use stolen credit cards. Six percent might not sound that much, but it really puts it into perspective to consider it is actually 60 times the rate of illegal payments with the old-fashioned card.
Security analysts noticed that Apple Pay’s problem might just be its very pitch: simplicity. Apparently, a lot of frauds were made possible by loading stolen cards onto iPhones and then using them to make transactions at stores. Same experts believe that Apple Pay could’ve been a lot safer if users had to go through more secure procedures than just proving their identities upon signing up for the service.
Security vs. easiness of use
The problem with finding balance between ease of use and proper security is not that new. Technologists have been struggling with it even more since new payment systems were introduced as substitutes to plastic cards. Apparently, both are vulnerable to fraudsters, and the problem still remains.
However, if done properly, mobile payments might offer a solution. Their strongest feature is the lack of swipe – a crucial improvement since the invention of fake card readers. But doing it properly also means a lot of complex procedures for sign up and usage, so many customers, retailers and banks are taking a lot of time in accepting the technology.
Apple Pay started being available to consumers back in October, and its simple use made it easier to embrace by stores and banks, and the service has seen steady growth during the last months. Apple reports claim that hundreds of thousands of location are now accepting Apple Pay; Bank of America seemed to back those claims, also reporting that more than 1.1 million of credit and debit cards were added to Apple devices in the first two months after Apple Pay’s launch.
Time for a pause for retailers and banks
But retailers are backing off a bit after the recent fraud reports. Michelle Evans, senior analyst for consumer finance at Euromonitor, explained that many issuers probably overlooked some of their best practices in favor of accepting Apple Pay, creating the best environment for fraudulent practices.
Security analysts agree with retailers in their reluctance, explaining that the basic setup for Apple Pay is the fundamental problem. With an app, a credit card number, an expiration date, and a three- or four-digit verification code, the users are good to go.
Apple employees rate consumers as safe or risky, and, based on their buying habits at its stores or on iTunes, decide whether to reject their payments or not. However, security analysts believe that Apple Pay should do more in figuring out the bad consumers from good ones, and put more effort in stopping trickster in their endeavors.
Even with the flying fraud headlines hitting Apple’s reputation, analysts trust that the company can handle it and, with upgrades, the payment service will be able to weather any trouble. Darren Hayes, assistant professor in cybersecurity at Pace University added that frauds have and will always be happening, with or without Apple Pay’s help, and payment-card fraud will stick around for a long time. But Apple Pay should watch that large target on its back.
Image Source: Forbes


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