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Apple Inc. (AAPL) Pay Under Attack by Fraudsters

Apple Inc. (NASDAQ:AAPL)’s Apple Pay is taking a hit from fraudsters in its early days. To discuss fraud concerns, CNBC talked to Cherian Abraham, Senior Consultant at Experian and Patrick Moorhead of Moorhead Insights & Strategy. Apple Inc. introduced Apply Pay as the safest way to make mobile payments but in its statement which it sent to the Washington Post, Apple Inc. has admitted the absence of a standard adopted procedure for banks to verify consumers’ debit and credit cards.


“After Apple Pay had launched – as Experian – who focuses on products across the customers’ life cycle – we started hearing of high levels of fraud within Apple Pay – shared with us by a few issuers. And it shouldn’t be surprising because the first un-chosen default demographic for every new payment system is the fraudster and the unofficial use case is fraud. So, it should not be surprising that we did see high levels of fraud for Apple Pay in the first few. And I think it is getting better. […] You should not hesitate to use Apple Pay because it is inherently secure,” Abraham said.

The weak link in the system is where consumers enter their credit card information. It is hard to hack it but it is not hack-free. When a consumer adds a credit card to Apple Pay it sends certain data to the bank that includes the consumer’s current location, last four digits of their phone number and a list of the consumer’s recently made iTunes purchases. Apple Pay waits for the bank to verify the consumer’s identity, which banks should work out based on the data sent by Apple Inc. (NASDAQ:AAPL). Apparently banks are not following the correct path. In some cases, a credit card can get added to Apple Pay within a matter of seconds.

“It is not fair to, a portion, just blame on the banks themselves because they did not have enough time in terms of setting up the apparatus to onboard customers more efficiently than having consumers call into a call center. As we all know, the fraudster is better at social engineering than the call center employee is at sniffing out fraud,” Abraham said.

Perhaps Apple Inc. has rushed Apple Pay to the market too soon, so, even though major banks have adopted standard procedures for the verification of cards, some smaller banks have been caught off-guard with the application process. For smart cyber criminals it is too easy to load up a stolen credit card on Apple Pay.

“I think we need to bring some common sense to this discussion because none of this stuff adds up. First of all, Apple doesn’t authorize credit cards. The issuers and the banks do. […] I think this is a case of few banks who weren’t prepared for this – that are trying to maybe play CYA. It’s not Apple again who is validating these. These are the banks who are validating this. And for instance, when I did it, I called Bank of America. Other people might have to get an email or they put in a validation or a pin code. But, this is not an issue. It is not widespread and it’s not rampant,” Moorhead said.

As pointed out by industry experts it is not Apple Inc.’s fault but if Apple Inc. (NASDAQ:AAPL) does want Apple Pay to become a popular safe mobile payment option it must push all banks on its panel to adopt stricter measures for validating cards for Apple Pay. Security should be as inherent as its simplicity is.

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