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Banks to take on fraud liability in Apple Pay deal, USAA announces Nov. 7 availability

On Thursday, four banks offering support for Apple Pay commented on Apple's first foray into mobile payments, confirming that liability for fraudulent activity will ultimately fall on their shoulders for both online and physical transactions.




Ahead of Apple Pay's schedule launch later this month, The Daily Dot spoke with representatives from four major banks backing the payments service, including Chase, Navy Federal Credit Union, PNC and USAA. The firms lauded Apple's secure payment process, which incorporates Touch ID fingerprint identification, touchless NFC, Secure Element data storage and tokenized transaction processing.

"When Apple got in touch with us and showed us their solution, we were very excited to see what they had been working on and what they had developed, particularly since it was so convenient, secure, and private," said Randy Hopper, VP of Credit Cards at Navy Federal.

Hopper believes Apple Pay will spark industry interest in tokenization, possibly to the point where it will become a standard banking model. At its most basic level, tokenized transactions replace credit card data with generated Device Account Numbers, which in the case of Apple Pay is stored in a Secure Element inaccessible by iOS. When a payment is initiated at a compatible point-of-sale terminal, a token is transmitted and decoded by the backend payments system, leaving sensitive customer information out of the equation.

As an added bonus, banks will be able to use unique tokenized transaction identifiers to determine when customers use Apple Pay versus a physical credit card.

As for risk and liability, USAA Assistant Vice President Vikram Parekh said the same policies employed in credit card swipe payments will be carried over to Apple Pay. Chase and PNC also confirmed full liability protection will be extended to their customers.

"The bank has liability for any purchases made when Apple Pay is offered and used as the form of payment," Parekh said. "This is true for both face-to-face and for 'in-app' purchases."

Parekh also said USAA MasterCard and Visa card customers will be able to use Apple Pay starting Nov. 7, the first official release date announced by a banking service.

Apple is expected to roll out Apple Pay by the end of October, possibly as a feature in the upcoming iOS 8.1 maintenance update. Recent analysis of the latest iOS 8.1 beta 2 version revealed hidden Apple Pay settings menus and legal disclosures, suggesting the service will launch in the near future.