Apple Has Its Banks Take On The Apple Pay Fraud Liability

Despite assurances at the September 9 Event announcement covering the forthcoming Apple Pay system it is still down to the individual payment processors and banks involved to cover any fraud or losses incurred for both physical and online transactions using the system.

The financial institutions Chase, PNC, Navy Federal Credit Union, and USAA have willingly accepted the risk without Apple seemingly putting their money where their mouth by one the one hand assuring customers that the new payment system is safe, while leaving the major banking institutions holding the bag if they're found to be incorrect.

Apple Pay is due to launch later this month. Several of the banks have publicly admitted that they are impressed with the secure aspects of the payment system which incorporates touchless NFC, Touch ID fingerprint scanning, Secure Element data storage with devices and tokenized transactions which doesn't transmit the card details at all.

The financial industry has shown considerable interest in the idea of tokenization of credit payments instead of needing to transmit actual card details over a secure line. The Secure Element module that iOS cannot directly access ensures that identification is possible by point of sale backend systems without the need to risk security issues by transmitting identifying information either. If the Apple Pay approach to secure payments proves successful then some member of the financial industry see it as a test balloon which could change the way secure payments are handled in the future.

For customer coverage the same level of protect from fraud on improper card swipe transactions will be afforded customers who use Apple Pay. The banks will be accepting financial responsibility for both in person and in app purchases made using Apple Pay. USAA Visa and Mastercard customers will be able to begin using Apple Pay from November 7. Other banks and card issuers are expected to following shortly thereafter.

Apple Pay is expected to be included in a future update of iOS 8. An iOS 8.1 beta 2 version was discovered to have Apple Pay settings and legal disclosures hidden away from users suggesting that a new update of iOS will officially launch the service for owners of iOS devices with a Touch ID interface.