THE Apple Watch has been available to order for less than a week, but by some estimates one million have already been sold. Technophiles are watching closely to see how the glitzy new product will change any number of emerging businesses, from wearables to mobile-health. Yet in the short run the Watch's greatest effect may be in the boost it provides to smartphone-based payment systems. Apple Pay is already available to many iPhone users, but the Watch, which allows consumers to buy things with little more than a wave of the wrist, could significantly accelerate adoption among Apple customers and retailers. Assuming, that is, that users warm to the new payments technology enough to get over fears about stolen accounts. They should. Though "Apple Pay fraud" headlines have not been uncommon in recent months, smartphone-based payments are typically more secure than credit cards. Why is that?
Smartphone-payment systems are not iron clad. The weak spot in any mobile-payment system, whether Apple Pay or another, is the point of enrolment, when a customer's existing credit card is linked to the system. Apple explains that as part of its enrolment process, it gathers a variety of markers about the user's online Apple account and phone characteristics, such as a rough approximation of its current geographical coordinates. Apple hands off these data to a bank, which compares them with known information. Most of the time, the details match and a card is added to a legitimate owner's handset. If the phone is in Nigeria, say, and the customer's home address is North Carolina, a red flag is raised. In such cases, the bank will request more information from an enrollee, which may mean phoning her up. This is where identity fraud most commonly occurs in mobile systems: clever criminals can provide enough information about the card's owner to pass a bank's tests.