This week, Apple launched the iPhone 6, which has payment functionality. The Apple Pay system relies on contact-less payment technology to allow users to buy goods and services using tokenization.
American Banker reported: First Data, TSYS and Visa have announced their tokenization technology will support Apple Pay, which will enable the upcoming iPhones and Apple Watch to make contact-less payments at a variety of retailers from cards issued by many of the top banks.
Tokenization is the process of swapping sensitive data (ie your bank account details or credit card number) for non-sensitive data – a randomly generated number which gives authorisation for the payment and can be set to expire within a specified time frame. This makes it a useless target for fraudsters and makes life easier for the retailer, who never sees or handles the customer’s personal information.
Given the recent highly public security breaches in Apple’s i-Cloud, the firm has a lot of work to do to restore confidence in its ability to safeguard access to bank accounts. That said, as soon as any new technology is launched, hackers work towards breaking into it. The Apple Pay system is a great step forward for new payment services, but it will certainly face some security challenges in the early years which may stop mass adoption.