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Is Apple Pay Secure?

In the fall of 2014, Apple Pay launched with much fanfare — almost eclipsing the simultaneous release of Apple's iPhone 6. More than 220,000 merchants had already signed on to the payment technology before it was released. And after the launch, Apple registered over 1 million new users in 72 hours.

But all hoopla aside, how secure is Apple Pay? Can this new payment technology help keep your customers' financial data safe from thieves and hackers?

It's really too soon to tell. But Apple Pay has the potential to become one of the most reliable payment technologies in the world. To understand why that is, it helps to look at some of the advanced security features that come with this new mobile payment option:

1. Near Field Communication (Close Proximity Required)

Like many emerging mobile payment technologies, Apple Pay uses near field communication (NFC). It's similar to Bluetooth, but information sharing happens over much shorter distances — usually over a few inches. So a customer's mobile device must be physically present and incredibly close.

2. Manual Authorization Required

To initiate an Apple Pay transaction, the customer must manually activate the phone and request a connection with the payment terminal. Like near field communication, this feature makes it difficult for nearby criminals to simply hack in.

As a bonus, an Apple Pay transaction only goes through after the user has entered in a personal identification number (PIN) or supplied a biometric fingerprint scan (Touch ID).

3. Tokenization (No Stored Data)

Unlike many other mobile payment options, Apple Pay leverages tokenization — a special security feature that swaps out a user’s 16-digit personal account number (PAN) with a randomly generated ID ("token”). This one-time ID is used during the transaction before becoming 100 percent useless.

Thanks to tokenization, no financial data is ever stored within the merchant's payment environment. And with nothing to store, there's nothing to steal. But even in the off chance that a criminal captures this token, he'll never be able to link it to any credit card.

4. Lost Mode (and Find My iPhone)

Apple Pay uses one additional security feature.

Normally when a credit card or debit card gets stolen, customers must call up their banks and suspend future payments (or cancel the card). And it may take a while to discover that your credit card is even missing.

A missing iPhone is much more conspicuous — especially for Apple fans who rely heavily on their mobile devices.

If and when an iPhone goes missing, users can suspend their Apple Pay accounts by remotely placing their devices into "lost mode." In order to use this security feature, customers must enable Find My iPhone in the device’s settings.

Although not officially a security feature, the Find My iPhone option also allows users to physically locate their devices and thieves using 3G, 4G or Wi-Fi technology.

Is Apple Pay Secure Enough for You?

No payment technology is 100 percent foolproof. And hackers have already started to explore potential loopholes in Apple's most recent product launch.

But given the above features, Apple Pay is currently one of the most secure payment options around. In fact, its arrival may indirectly increase fraud with other payment technologies — i.e. those that don't use NFC, tokenization and location tracking. These older payment options are easier to exploit by comparison.

Topics: Mobile Payments

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