Whether you’re buying things or sending money to your friends, a lot is happening under the hood when you use Apple Pay.
Understanding how Apple Pay works can be a little technical, but don’t worry. This guide will explain everything in plain English.
At the end of this guide, you’ll clearly understand what happens when you add a card to the Wallet app and pay with Apple Pay using your iPhone, Apple Watch, or MacBook Pro.
Before we get started, there are some terminologies that you need to understand first.
Payment Processing Terms
- Secure Element (SE)
- Near Field Communication (NFC)
- Tokenization
1. Secure Element (SE)
It’s a special microprocessor chip that stores sensitive data, such as payment information. The SE is embedded into the NFC chip found in iPhone 6 and newer, Apple Watch, and MacBook Pro (newer models only).
It’s essentially the same chip that debit and credit cards use to secure your payment information.
2. Near Field Communication (NFC)
NFC is a short-range wireless technology that allows two electronic devices to communicate when placed right next to each other (usually 10 centimeters or less).
Think about your iPhone (certain models), Apple Watch, and POS terminal, they’re all NFC-equipped.
3. Tokenization
It’s a highly secure process that substitutes sensitive data with a one-time algorithmically generated number known as a token.
In context, the Primary Account Number (PAN), or the credit card number, is replaced by a token when you add a card to Apple Pay. In short, a token is just a fake credit card number.
A token holds no value. If it falls into the hands of the bad guys, it’s useless since they cannot reverse it back to the PAN.
With that out of the way, let’s explore what happens behind the scenes when using Apple Pay to make purchases online or in stores.
How Apple Pay Works
Here’s what happens when you add a card to the Apple Wallet app: the entire process takes just a few seconds.
Please use the code below to use this infographic on your site.
<img src="https://www.gotechtor.com/wp-content/uploads/2020/01/Add-new-card-to-Apple-Pay.png" alt="Add card to Apple Pay"/><a href="https://www.gotechtor.com">Infographic</a> by Gotechtor.Apple Pay uses EMVCo’s contactless suite of specifications to provide a higher level of security than traditional credit or debit cards.
When you add a credit or debit card to the Wallet app for Apple Pay use, it’s assigned a token (but Apple calls it “Device Account Number” or DAN).
To ensure maximum security, your Apple device utilizes a dedicated Secure Element (SE) chip to store encrypted payment tokens. These tokens represent your credit card information but are unreadable by unauthorized parties.
The DAN is specific to an Apple device. If you add your card to another device, it will have a new DAN. This is critical for identity security and fraud protection.
When you complete a transaction with your Apple device at a point-of-sale (POS) terminal, the DAN and a dynamic security code (cryptogram) are sent using Near Field Communication (NFC).
This secure process follows EMVCo’s standards, ensuring a safe and reliable transaction for you and the store.
The system uses “dynamic security codes,” which are unique and randomly generated for every transaction.
This makes it extremely difficult for someone to steal your code and use it to make unauthorized purchases because the stolen code would only work for that one specific transaction.
The infographic below will give you a visual approach to the behind-the-scenes when someone buys something using Apple Pay.
Please use the code below to use this infographic on your site.
<img src="https://www.gotechtor.com/wp-content/uploads/2020/01/How-Apple-Pay-works-infographic.png" alt="How Apple Pay works infographic"/><a href="https://www.gotechtor.com">Infographic</a> by Gotechtor.Now that you know how Apple Pay works, you might be interested in learning what to do when Apple Pay is not working on your iPhone.
Is Apple Pay Safe to Use?
While Apple Pay is one of the most secure payment methods available, it’s important to remember that no system is foolproof.
Apple Pay utilizes a dynamic security code instead of the standard three-digit security code on credit or debit cards.
This generates a security code for each transaction, preventing anyone from stealing your card details to make unauthorized purchases.
Additionally, if you lose your Apple device when Apple Pay is activated, you can stop all transactions using the Find My iPhone service.
Simply activate lost mode on your iPhone. Even if the device falls into the wrong hands, the thief still requires your passcode, Touch ID, or Face ID to authorize purchases.
Apple also has security measures to prevent sellers and third parties from collecting your financial information.
When you make a purchase using Apple Pay, the merchant never sees your data. Additionally, Apple doesn’t store your credit or debit card numbers on the device or its servers.
This ensures that any form of theft or fraud is nearly impossible with Apple Pay.
Does Apple Pay Share Your Data?
During the initial release of Apple Pay, Apple stated they would not track any app usage. They further promised to keep all transactional information between you, the vendors, and the banks.
This means Apple does not store or sell any of your data related to Apple Pay. They have too much at stake for a breach of consumer trust.
If you have any feedback or questions, then please don’t hesitate to leave a comment below.
