New payments technology doesn't remove the need to take 'traditional' security step.
By Lisa Hochgraf
I've helped CUES publish a fair bit of information about how Apple Pay will be a key tool in credit unions' security arsenals going forward. (In particular, the post "Apple Pay and EMV Security" comes to mind.) So imagine my dismay when my boss sent me a link to a blog post entitled, "Turns out Apple Pay Can't Solve Credit Card Fraud." The post author says the hardcore Apple Pay security technology works well--but can't overcome issues with cards themselves. "According to Drop Labs," the post details, "people are buying credit card numbers online, then loading those same numbers into Apple Pay, in essence making themselves a handy fake credit card, without going to the trouble of making a physical fake." Blah. So much for staying ahead of the fraudsters. For perspective, I touched based with the experts at Cornerstone Advisors Inc., a CUES Supplier member and our strategic partner for technology and enterprise risk management services based in Scottsdale, Ariz. Here's what Director Ryan Rackley had to say: "Apple Pay is not an excuse to bypass the 'know your customer' guidelines. Apple Pay has been in the market a few months now, and the weakest link is proving to be the card setup process. "Credit unions should not take this lightly, and forcing members to validate their identity when attempting to set up an iPhone to use with Apple Pay should be considered a requirement. If this step is bypassed, it will not take fraudsters long to figure out which credit unions are the easy targets. "Some say that this introduces friction into the process, and this would be true … but I do not know any credit union that would willingly accept the risk of possible fraud losses of a magnitude of 10x just to shave a couple of seconds off the card setup process." Proceed with caution!
Lisa Hochgraf is a CUES senior editor. Also read "The Member Education Piece of Apple Pay," based on presentations made at CUES' one-day "Apple Pay, MCX & Beyond: Your Mobile Pay Strategy" program in January. Attend CUES School of Product and Channel Management in April or CUES School of Payments in May in Chicago.
