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What Does the Apple Pay Announcement Mean for CNP Fraud?

posted on: Tue Jun 28 2016

What Does the Apple Pay Announcement Mean for CNP FraudApple Pay is coming to Mac desktops and laptops, Apple Senior Vice President Craig Federighi announced June 13, 2016 at Apple’s Worldwide Developers Conference.

Shoppers using a desktop or laptop Mac will see an Apple Pay on-screen button option appear in their Safari browser when checking out at participating online retailer websites, details include:

  • Available prior to 2016 holiday shopping season as part of the update to MacOS Sierra from OS X
  • Desktop and laptop purchases will still be authenticated by the buyer's fingerprint sensor on their iPhone, iPad or Apple Watch at the time of purchase
  • Desktop and laptop purchases have to be made using Apple’s Safari browser (approximately 13% share of browser market)
  • Credit and debit card numbers will not be shared with the online merchant and actual card numbers are not stored on shopper’s device or on Apple servers

What’s the impact of Apple’s announcement on card-not-present (CNP) fraud for eCommerce merchants? In two words: not much.

The way Apple Pay works, authentication and verification of an Apple Pay account takes place before any transactions – including CNP transactions – take place. The issuing bank is responsible for confirming the validity of the credit card account(s) being used in the Apple Pay account, and so assumes liability for unauthorized or fraudulent online purchases. In another words, eCommerce merchants are NOT on the hook for fraudulent Apple Pay orders.

One caveat: as with all Apple announcements, there is the possibility that the terms of the service agreement could evolve in the face of changing circumstances. For example, if CNP fraud levels reached levels that are unanticipated – and unwelcomed – by issuing banks, the program could be modified to protect Apple and its financial affiliates.

But for the present, the newly-announced Apple Pay channel presents no liability risk to the merchant. In fact, eCommerce websites using best-in-class fraud prevention solutions may want to create a rule to automatically approve Apple Pay transactions. This will help speed checkout, increase revenue (higher order approval rates and fewer false positives or declines) and minimize reviews (lower OPEX)…while still avoiding fraud and chargeback losses. This enables those merchants to maximize financial performance.

Of course, in-app Apple Pay payments – for example, within Uber, BestBuy, Priceline, Staples, StubHub, Target, Ticketmaster, Kickstarter, etc. apps – still remain the biggest component of Apple Pay, accounting for 67% of all Apple Pay transactions. And interestingly, in-store/POS Apple Pay transactions have declined as a percentage (in a store that accepted Apple Pay, for a cardholder holding a eligible device) from 5.9% in March 2015 to 5.1% in October 2015, though this data point may be somewhat misleading as the number of Apple Pay devices has been increasing at a rapid rate, greatly increasing the denominator in the equation.

But for eCommerce merchants processing CNP transactions, the bottom line implications of this announcement are fairly straightforward. The new “Apple-Pay-on-desktop-and-laptop-Macs” presents no heightened risk of CNP fraud or chargebacks. And with best-in-class anti-fraud solutions like Kount in place, merchants can speed up checkout and speed up sales with Apple Pay…without speeding up fraud. And that’s a boost to overall financial performance.

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