A big concern these days for anyone with a credit card, merchants and customers alike, is fraud. We no longer explicitly trust big name companies to have completely secure measures; however, it is assumed they have more than adequate measures. Apple’s release of Apple Pay seemed well-tested, but the unusually high fraud rates that have recently come to light tell a different story.
When Apple Pay first came out, numerous banks and credit card companies were excited and eager to be in Apple’s list of chosen companies. Apple’s strategy to stay simple and clear-cut left the company neglecting to include many customer details upon signing up for the mobile program. The verification of phone numbers and addresses were not something Apple Pay required, and this is shocking considering the amount of fraud that could occur without these. Online companies, such as ourselves, know that requiring the customer’s address can catch fraud before it occurs due to time sensitivity and faulty addresses. Faulty addresses are caught in the payment process, and it normally takes a few days it takes to ship packages, so there is more time to catch thieves. However, in the case of Apple Pay, they only required basic credit card information from a user. According to a New York Times article, an industry consultant named Cherian Abraham put Apple Pay’s fraud rate at an alarming 6 percent. In comparison, a normal credit card fraud rate is at 10 cents for every $100 spent. That’s 60 times the average credit card fraud rate.
In addition, the New York Times article stated that banks are also to blame because of their silence and lack of further precautionary measures and fraud defenses. Many banks and establishments trusted that Apple Pay would be aware of any fraud issues, and they also wanted to remain in good graces with Apple. Efforts to direct flagged credit cards were flawed because many banks directed callers to customer support centers rather than fraud prevention centers. The system to register credit cards has flaws, and neither the banks nor Apple are claiming failure.
Smart thieves can take advantage of this system by using stolen credit card numbers into iPhones and then using Apple Pay with those phones. Innovation is one thing, but when it becomes a hazard to security and an open invitation to fraud, Apple may need to reevaluate its security measures and demand stricter bank standards. They can begin to better prepare banks for Apple Pay and all the troubleshooting that accompanies a new kind of credit card.
According to PointofSale.com, since Apple Pay’s introduction, iPhone 6 customers have the option to use their mobile device to pay for goods and services at more than 220,000 Apple Pay partner merchants, which include retailers, financial institutions, restaurants, amusement parks and even vending machines. This staggering number of places leaves even more room for mistakes to occur, and all any customer needs is a smart phone and a bank account-real or fake. Gartner Research predicts that mobile payments will only continue to grow at a 35 percent growth rate until 2017, and this will bring 450 million global users. Those large numbers are going to bring Apple Pay’s security threats to an even brighter light, and the company should make sure they have lasting global fraud strategies in place. The technology has gotten easier to implement, to use, and to hack.
How can merchants and customers who want to be innovative and use Apple Pay keep their credit cards safe from fraud? A website called MainStreet.com, listed a few options to help protect customers using Apple Pay. First, research good banks before you choose one, and find a bank that has progressed with EMV chips and other new technologies. Look into their security measures and make sure they have the proper steps needed to deal with any fraud. Another two strategies are to set up transaction alerts and sign up for card and transaction monitoring services. These will help you notice any abnormalities that occur on your card or any large purchases that you don’t recognize. You should also stay on top of new cards, and get your card enrolled in Apple Pay. Any additional enrolled cards on Apple Pay will then trigger red flags for fraud. Lastly, it is important to pay attention to your credit card statements and assume you are not exempt from having your card stolen. With recent credit card breeches, the best way to protect yourself is by being proactive and careful.