Apple Pay: A Bountiful Harvest for Fraud?


Article by Becky Errico | 541 words

With the release of the iPhone 6 and 6 Plus, consumers received more than just a new phone. The devices were the first to be compatible with Apple Pay. This new form of paying allows a consumer to have a digital debit or credit card available on their phone. These can be scanned when they make a purchase.

With over two million people already using it, according to an article from The Guardian, it’s clear that Apple Pay is already a major hit. Credit card companies have already reported that, as of the end of January, Apple Pay was responsible for two out of every three dollars that were spent through contactless payments—forms of payments where a device (usually a physical credit card) is swiped over a reader.

However, fraud is a problem for any card, and it looks like Apple Pay isn’t an exception.



Apple Pay’s Two Security Measures

Security for the device has two “gates” a person must pass through. One is on the device itself, which is the fingerprint scanner on the bottom of the iPhone. When a purchase is made, the customer has to scan their fingerprint as they hold up the phone to a reader. The purchase is then approved and the transaction is complete.

The other gate is monitored by banks. As The Wall Street Journal explains, the process starts with Apple sending some information to the user’s bank, including part of their phone number and the type of phone they’re using. Then it is the bank’s job to ask for more information, such as the last four digits of the customer’s Social Security number. This is where the fraud is coming in.

How the iPhone Fraud is Happening

Instead of hacking into the iPhones, the fraud is occurring through identity theft. Once the criminals have the personal information, such as someone’s Social Security number, all they need is a new iPhone. Then, as The Guardian explains, they can use the stolen information to verify new cards on the phones they have—but under someone else’s name, of course. After that, they can start buying whatever they want. Coincidentally enough, many criminals are using their stolen information to purchase devices from Apple stores since they can be resold at high prices.

The fraud was first brought to light in February by a blog writer named Cherian Abraham. He believes that 6 percent of Apple Pay transactions could be fraudulent, as compared to .01 percent for all credit cards. As The Wall Street Journal notes, Abraham is an adviser to SimplyTapp, a digital payment company competing with Apple Pay.

Apple Pay’s Security Helps the Fraud Along

Apple was careful to create many security measures to protect the cards, but one step of the verification is actually helping those committing the fraud. Tech expert Nicholas Thompson of New Yorker magazine spoke about the vulnerability to CBS This Morning. Apple created a system so that, at a checkout, the cashier wouldn’t be able to see personal information, unlike with tangible cards they read. But because of this protection, employees can’t confirm who is using the card. The new digital form may feel like a step forward, but it might actually be taking one step back in security.

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