Apple Pay 101

How to Protect Yourself from Identity Theft with the Latest Mobile Payment Method

Apple Pay 101
October 29, 2014

Apple Pay, the new mobile payment service introduced by Apple, went live earlier this week to decent reviews. Many people who used Apple Pay at brick-and-mortar retail stores reported smooth, glitch-free transactions—and that is one of the Apple Pay selling points, convenience at the register without the potential exposure of your card information to identity thieves. With breaches at retailers like Target, Home Depot, and Staples fresh in the minds of shoppers, Apple Pay may be able to use this edge to gain a foothold where other mobile payment efforts have failed in the past.

What gives Apple Pay an edge in preventing identity theft? Generally, it is the concept of tokenization combined with the Touch ID security system of the newest iPhones, giving you multiple layers of protection. Tokenization replaces the card number with a similar, randomized number that is used only for that individual transaction. The merchant never sees or stores your actual card number, removing the concern of breaches at point-of-sale.

If your phone is stolen, several security layers continue to protect you. The Touch ID feature makes it difficult for any thief to use your phone to make purchases or to extract your account information. The phone does not store your account number, but instead uses a device-specific number for the token exchange. The Find My iPhone feature allows you to suspend payments, or you can completely wipe the iPhone’s information as a last resort.

To use Apple Pay in stores, you will need a compatible device (currently the iPhone 6 or 6 Plus), a card issuer that has signed on to the program, and a merchant that has a suitable NFC (Near-Field Communications) reader. Online use requires an app that has incorporated Apple Pay capability.

Assuming you have all of the above (along with something you want to purchase), here is what you need to do.

  • Verify the Operating System – Apple Pay requires that iOS v.8.1 or higher be installed for the service to be activated. If you have a previous version on your phone, upgrade the iOS before proceeding.

  • Set Up Your Card – Your credit card number is entered only once, during the setup process. You can enter your card’s information in the Passbook app, or take a picture of the card and send it to Apple (which to us is a weak security link in the process). Entering the security code activates the card.

    You can add multiple cards to your account, but one will be chosen as the default card for regular use. You can switch cards in the Apple Pay menu prior to any purchase.

  • Set Up Your Fingerprint – You need to initialize the system to recognize your fingerprint. Some people prefer thumbs; others prefer index fingers. Experiment to see which works best for you.

  • Shop and Pay – If you are using apps, you choose the Apple Pay option and complete the purchase by using the fingerprint reader. In stores, just hold the phone by the payment terminal and Apple Pay will open. You then complete the purchase by touching the fingerprint reader.

It may be as simple as that, and you are done. However, you may be required to sign on the store terminal, depending on purchase amounts, or you may also be required to scan loyalty cards or other store-specific cards to receive that store’s benefits. That is one case where the anonymity of Apple Pay works against it.

There will be some glitches as the technology is implemented; some have already been reported. Paying online or through apps is still sketchy, as the payment system must be incorporated into the app by the app developer. So far, it appears that some apps have done this correctly, and others have not.

Currently there are over 200,000 retailers that have signed on to Apple Pay, and appropriate readers will slowly be integrated into more retailers and outlets over time. It remains to be seen if Apple Pay will succeed — but with its improved security and name cachet, it has a fighting chance to be the first widely accepted new mobile payment method.

If you would like to prevent identity theft, check out our credit monitoring service.

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