Identity Fraud and Apple Pay: A Discussion

  • Sam Maule
  • May 20, 2015
  • 1

© Can Stock Photo Inc. / piedmont_photoThe payments space moves at what seems like the speed of light.  New products and companies are introduced almost daily, everyone is chasing the next unicorn, and a winner of mobile wallets is declared and then re-declared every other hour by payment pundits.

Below is a follow-up conversation from the Emerging Payments Hangout held April 30, 2015 with Experian’s Cherian Abraham and Carlisle & Gallagher Consulting Group’s Emerging Payments Practice Leads Sam Maule and Jim McLeod.

Q: Security will always be an issue, how is Apple Pay fraud any different?

A: Cherian Abraham – The reality of always having breaches that leak consumer data requires all of us to rethink how we approach security. And, approach it in a way where we don’t put the onus on good and legitimate customers to prove their identity reliably, while letting fraudsters go scot-free.

Q: What will the role of the Call Center play in the future?

A: Cherian Abraham – In the aftermath of identity fraud in Apple Pay, issuers largely relied on call centers to screen out fraudulent requests – this is proving to be both unreliable and difficult to scale. Unreliable because, the Call center employee exists to help, and not weed out fraud – and thus default to inadvertently helping the fraudster. Difficult, because Apple Pay is first in a long line of other “Tier 1 or Tier 2 token requestors” – Samsung Pay, Google Wallet, Microsoft, Amazon and other retailers and wallets – and provisioning a credential should be scalable, secure and silent

Q: What appears to be lost in all this noise concerning payments and digital wallets?

A: Sam Maule – We are still in the embryonic stage of this new disruptor.  A little patience is required.  Companies and solutions will stumble, products will be over hyped, and consumer adoption will be over stated as far as the near term is concerned and under stated as far as the long term.

“I’m not a fan of facts. You see, facts can change, but my opinion will never change, no matter what the facts are.” – Stephen Colbert.

Q: Do consumers care?

A: Jim McLeod – While the security surrounding Apple Pay is getting most of the attention by the media and payments “geeks” (self-included) most consumers do not seem to be phased.

With all due respect to my colleague Sam Maule (and Stephen Colbert) the opinion about Mobile Payments being in the embryonic stage is largely true; it is the facts that make it true.  There are limited players, limited devices, limited acceptance and most importantly no “real” reason to adopt.  And yes, I am talking about consumer rewards.  The merchant is not motivated to push mobile payments and the consumer is not motivated to use, minus the “geeks” mentioned above.

Q: What methods of consumer identity verification should be adopted to address the issues concerning Personally Identifiable Information (PPI)?

A: Cherian Abraham – So as we try to look beyond costly and inefficient channels such as call center, to faster and more reliable ways to verify customer identity – we must treat that question as comprehensively as we can, and that includes acting on both static and dynamic data (for example: device data). As devices outgrow the number of people on the planet, a dynamic device centric identity trumps human identity – because latter can be derived from the former. No longer do we require a customer to assert or validate his identity, the collection of devices that he uses, can together confirm in his stead. As these device identities tend to be immutable as a whole – we can thus grow more comfortable with the algorithmic definition of a consumer identity – one that is probabilistic and yet far more difficult to impersonate.

Q: Who is best positioned to emerge as the winner in the mobile wallet space?

A: Jim McLeod – As Sam and many others  talk about winners in the mobile wallet wars, when there comes a time that any mobile payment company can offer merchant value (lower cost, more frequent visits, bigger basket size) and consumers are rewarded (lower cost, valued added points, free stuff) then we will see winner(s) start to take shape.  As Sam Maule stressed patience, I would agree, but when those two things above come together coupled with additional players, devices and acceptance then we may move right from embryotic to a baby boom.  There will continue to be speed bumps on this road to mobile payments nirvana, but we will need a larger sample size before any “winners” can be declared.  Now should banks themselves be one of the major players in the mobile wallet space, well that is a question for a future Carlisle & Gallagher Google Hangout…

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