Mobile Pay Security

In our previous blogs we’ve focused on the history and form of mobile payment. In today’s blog, however, we are going to examine an issue that is becoming more and more important as mobile pay grows: security. Everyone loves convenience, speed, and ease of use but most consumers have the same vital question – is it safe to use mobile pay? 

A definitive answer as to if mobile pay is secure enough for consumers can never truly be found, as the comfort levels with technology of consumers varies wildly depending on individual needs. Although one thing is certainly true, experts aren’t sold on the security yet¹. A 2015 survey conducted by ISACA found that only 23% of experts agreed current security for mobile payments was sufficient while 47% claimed mobile payment security is overwhelmingly insufficient¹. Despite this, 87% of experts agreed mobile pay usage will continue to rise, with a projected 4.77 billion mobile phone users by 2017, making security measures a necessity for the continued safe use of mobile pay¹. 

How are the payments currently secured? In previous blogs we touched upon the use of internet and NFC chips to process payments. Services like PayPal send payment information via the internet, while mobile pay services like Apple Pay utilize near-field communication (NFC) chips to send information between payment terminals and mobile devices². With NFC chips, a phone (or credit card) can be placed near a terminal, and the terminal is able to read information from the chip and subtract funds from the information stored on it, allowing for the payment to process². The security measure for NFC chips lies in a mechanism called the ‘secure element’ which holds authorization over the chips communications with a unique digital signature². The security measures of the secure element are designed to protect the chip from hardware and software attacks from unauthenticated sources². Whenever an authentic transaction takes place, the security element generates a specific, one-time use code which the terminal can use to access the information on the NFC chip². 

Despite these measures, mobile pay is still susceptible to attacks, which is reflected in the experts’ opinions. The biggest reason mobile pay is at risk is because of the massive amount of money being exchanged with it and one thing is always proven to be true: hackers follow the money³. Because there is such a large opportunity for profit (in this case from stolen funds), there will be a host of people interested in attacking the security of mobile payment for personal gain. Common methods of mobile pay security threats include phishing scams, hackers accessing phones via public wi-fi networks, human error, or chip manipulation¹. In some cases hackers have been able to breach the secure code of terminals and re-create the technology, allowing them to create false terminals which interact with NFC chips and receive the unique codes from the secure element¹. This in turn gives them free reign to manipulate data or access funds through the chip³.

While mobile pay may be safe enough for some, and woefully insecure for others, the reality we are seeing is that it is not a fad. Mobile pay is here to stay and growing fast. Consumers should be aware of the risks they face when using it and, hopefully, in the years to come these risks can be significantly reduced to protect all users. 

Footnotes

1 Rampton, John. (Oct 4, 2016). Your Security Concerns About Using Mobile Payment are Valid. Entrepreneur. Retrieved From https://www.entrepreneur.com/article/282722

2 Profis, Sharon. (Sept 9, 2016). Everything You Need to Know About NFC and Mobile Payments. Cnet. Retrieved From https://www.cnet.com/how-to/how-nfc-works-and-mobile-payments/

3 Mukerji, Dipesh. (Nov 18, 2014). How secure are mobile payments? Kony.  Retrieved From http://www.kony.com/resources/blog/how-secure-are-mobile-payments

Android Pay

In today’s blog we will discuss the final, and possibly most threatening, platform for mobile pay. Developed by Google for use on any Android powered smart phone, Android Pay functions similarly to the way Apple Pay does for iOS devices. Utilizing NFC chips embedded in phones to facilitate communication between the phone and terminals, payments can be processed in seconds and consumer time can be saved¹. 

In many ways, however, Android Pay presents a whole new set of advantages and difficulties for consumers, businesses, and banks. The most glaring difference between Android and Apple Pay is the absence of transaction fees on the Android platform². Google has elected not to charge any form of transactional fee to banks looking to have their cards usable on the service or businesses looking to accept the payment method². Instead, the platform earns money through small ads displayed on the operating system². This is obviously a massive boost for businesses trying to cut costs, however for banks it represents a clear conflict. They will be happy to please customers by being available on the service (as almost every major bank is¹), but the lack of fees gives Android Pay a distinct advantage over even their own mobile payment services. This applies pressure to other mobile pay services, Apple Pay included, to drop their transaction fees². 

Another key advantage Android Pay has in the market is their substantial network domination. They represent the largest worldwide share of the smartphone market, as nearly 25% of all smart phones operate on the Android OS³. This offers them a massive advantage, as their network gives them the ability to reach out to a massive customer base to adopt the service. As we mentioned in our previous blogs, studies show that consumers value ease and convenience above all else, and for 25% of all smart phone users Android Pay has automatically become the most convenient, one-stop shop for their mobile pay needs. Even more damning news for other platforms, recent research papers which set out to evaluate mobile operating systems have predicted that Android will further capitalize on its market share to become the dominant global leader in the mobile industry⁴. If they can leverage the advantage that their network size affords them, they can also dominate the mobile pay market. 

Finally, and most importantly, Android Pay leads the market in terms of customer satisfaction. A survey conducted by First Annapolis Consulting found that 61% of Android Pay users were very satisfied with the service, more support than was shown for any other platform⁵. Despite only being released in 2015, and having no distinct technological advantage over other mobile pay platforms, Android Pay is quickly levying their substantial network size to become a market leader in mobile payment. 

Footnotes 

1 Betters, Elyse. (2016, Feb 8). Android Pay Explained: How it works and where it’s supported. Pocketlint. Retrieved From http://www.pocket-lint.com/news/135017-android-pay-explained-how-it-works-and-where-it-s-supported

2 Mamiit, Aaron. (2015, June 8). Google’s Android Pay Will Not Charge Transaction Fees: Now What, Apple Pay? Tech Times. Retrieved From http://www.techtimes.com/articles/58654/20150608/googles-android-pay-will-not-charge-transaction-fees-now-what-apple-pay.htm

3 Jones, Chuck. (2016, Feb 21). Apple’s iPhone: Market Share Vs. Profits. Forbes. Retrieved From http://www.forbes.com/sites/chuckjones/2016/02/21/apples-iphone-market-share-vs-profits/#8ea81db46f86

4 Gandhewar, Nisarg & Sheikh, Rahila. (2010). Google Android: An emerging software platform for mobile devices. International Journal on Computer Science and Engineering, 1 (1), 12-17. Retrieved From http://www.enggjournals.com/ijcse/doc/003-IJCSESP24.pdf

5 Boden, Rian. (2016, Sept 5). US Study reveals increased use and awareness of Apple Pay, Android Pay and Samsung Pay. NFC World. Retrieved From https://www.nfcworld.com/2016/09/05/347010/us-study-reveals-increased-use-and-awareness-of-apple-pay-android-pay-and-samsung-pay/

Apple Pay

Banks and alternative platforms are not the only methods of getting your mobile pay fix in today’s market. In this blog, we are going to explore one of the newest, yet fastest growing mobile pay platforms around: Apple Pay. 

Apple Pay was launched in 2016, with rollout coming to various markets slowly throughout the year¹. It essentially functions as a one stop shop for all your mobile payment needs on any Apple device. You can load your debit or credit cards from any bank in North America into your ‘Apple Wallet’ and pay directly from there¹. After that, making payments is as simple as tap and go, as the Apple Pay software utilizes the same techniques as other mobile pay apps (NFC chips as mentioned in previous blogs). Apple charges a fee to banks looking to have their cards registered on the service, which varies from 10-15 cents per $100 spent, depending on the country you live in². It also offers customers high security and confidentiality, as Apple has stated they record no transaction information on their servers and the payments require the consumer to provide their fingerprint for processing².

You might find yourself asking why banks would be interested in allowing their cards to be used via Apple Pay, since there is such a hefty fee taken which cuts into their revenue. However, when you look at consumer behaviour it is clear why no bank would want to be left behind. The convenience of having all of your bank cards loaded into one mobile wallet (as opposed to spread across different applications) cannot be overstated in the mind of the consumer². Banks are desperate to hold on to their client base and any advantage another bank offers must quickly be mitigated, which has led to all banks signing up for the service². Additionally, in Canada alone 44% of the smartphone market belongs to Apple and 85% of all stores are equipped to accept Apple Pay². We discussed in our previous blog how important convenience was in the mind of consumers, which makes Apple Pay compatibility essential for major banks. No institution wants to be left in the dust, only offering non-optimal mobile pay solutions for their customers. Globally, Apple Pay may not pose as much of a threat to bank specific mobile pay apps. Apple only controls 15.4% of the global smartphone market, a far cry from their domestic market control³. However, any loss of customers due to payment services cannot be overlooked. Apple has managed to leverage their large network of users into an effective competitive advantage in the market.

Apple Pay is an interesting example of how competitive the mobile payment market can be. By offering a service that envelopes what individual banks offer, Apple has managed to entice consumers to adopt their payment platform. Now a hardware/software company is a major player in a market based on commerce. Technology has paved the way for non-traditional companies to compete in totally new market spaces by effectively utilizing their network advantages and Apple is capitalizing on that opportunity. 

Footnotes

1 Betters, Elyse. (2016, April 4). Apple Pay explained: What it is and how does it work? Pocket-lint. Retrieved From http://www.pocket-lint.com/news/130870-apple-pay-explained-what-is-it-and-how-does-it-work

2 Behar, Rose. (2016, May 13). What Apple Pay means for mobile payment in Canada. Mobilesyrup. Retrieved From http://mobilesyrup.com/2016/05/13/what-apple-pay-means-for-mobile-payments-in-canada/

3 Jones, Chuck. (2016, Feb 21). Apple’s iPhone: Market Share Vs. Profit. Forbes. Retrieved From http://www.forbes.com/sites/chuckjones/2016/02/21/apples-iphone-market-share-vs-profits/#61f9c70b46f8