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Apple Wallet, Samsung Wallet & Google Wallet: Why They're Safer Than The Card

Left your wallet at home? No worries; you can still pay for those purchases! Just use your phone, right? We've all heard about Apple Pay, Samsung Pay, and Google Pay, but is paying from your phone truly safe?

Editorial Note: Articles published are intended to provide general information and educational content related to personal finance, banking, and credit union services. While we strive to ensure the accuracy and reliability of the information presented, it should not be considered as financial advice and may be revised as needed.

Apple Pay, Samsung Pay, Google Pay and other mobile wallets are revolutionizing the checkout experience by blending two developments in payment infrastructure to save you time: near-field communication (NFC) and token encryption.

Approximately one-third of all payment terminals nationwide have been updated to accept Apple Pay. However, it only works on phones equipped with the necessary NFC equipment. If you already have an iPhone 6 or a newer iPhone, though, all you need is the preinstalled Passport app. There are simple, on-screen instructions for adding a debit or credit card. You can even add your Listerhill Credit Union debit or credit card!

Samsung Pay is structured similarly, but only works on select Samsung Android devices. However, Samsung has incorporated magnetic secure transmission (MST) technology as well. Hold a phone against a payment terminal and it will emit a signal that simulates the magnetic strip on a debit or credit card.

In terms of convenience, this means you can use Samsung Pay on almost any payment terminal in the country. The only situation where Samsung Pay won’t work is when you need to insert your card into a slot, such as at a gas station. Otherwise, though, you’re free to use this payment method even if the merchant hasn’t updated their equipment.

Both payment methods use a process called “tokenization” for maximum security. In the simplest terms, tokenization is the use of a non-secure piece of data to stand in for a secure one. It’s like arcade tokens. The secure data is the quarter, which you exchange at a machine for a token. That token then tells the arcade machines you have a quarter (or credit) to play. The game machine never sees the actual quarter, but accepts the token that stands in its place.

Apple Pay, Samsung Pay, and Google Pay work the same way. When you make a payment with one of these services, the app creates a token – a random series of numbers – that corresponds to your account, along with a one-time security key. It transmits that data to the payment terminal, which sends that token to the “token vault,” a secure database that links these tokens to the actual accounts. If the security key is correct, the token vault will transmit a charge directly to the linked cards and return a verification of funds to the payment terminal. Since the token vault is hosted at the payment processor, the point-of-sale terminal never sees your card information.

This is different from a swiped or keyed transaction. Ordinarily, the terminal reads your credit or debit card information directly and transmits it to the payment processor, which then sends it to your financial institution. This means your card’s information is stored in three different places, any of which could be the site of a data breach.

With tokenization, your information is seen only by the payment processor and your financial institution. That’s fewer points of failure along the information chain and there is less vulnerability for your sensitive data.

This also means that Apple, Samsung, or Google have no idea what purchases you’re making. For fans of internet privacy, this is heartening news.

There are other layers of security involved in these services. To use Apple Pay, you’ll need to use TouchID, FaceID or input your PIN. For Samsung Pay, you’ll have to authenticate your fingerprint, input a PIN or confirm an iris scan. If your phone gets swiped, a thief will have a hard time using it to go on a shopping spree. In contrast, if a criminal grabs your actual wallet, they can do enormous amounts of damage to your finances and credit score before you even realize it’s gone.

Whether you’re a die-hard Apple fan or a staunch Samsung supporter, mobile wallets are an efficient, secure way to pay. Open the app, link your Listerhill card, and start leaving your wallet at home!


SOURCES:

http://www.theverge.com/2016/12/6/13864376/35-percent-apple-pay-us-merchants

https://en.wikipedia.org/wiki/Tokenization_(data_security)

http://appleinsider.com/articles/14/10/20/how-apple-designed-apple-pay-to-avoid-the-pitfalls-of-traditional-payment-systems

http://www.forbes.com/sites/forbestechcouncil/2016/12/22/the-promise-and-challenges-of-biometrics/#21c6fc044202

https://www.idropnews.com/iphone-7-vs-google-pixel/iphone-7-vs-google-pixel-apple-pay-android-pay-comparison/28596/

https://www.sans.org/reading-room/whitepapers/casestudies/case-study-home-depot-data-breach-36367

https://www.google.com/amp/s/www.cnet.com/google-amp/news/apple-pay-vs-samsung-pay-vs-google-pay-which-mobile-payment-system-is-best/

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Frequently Asked Questions

  • What happens to loans a member has at a liquidated federal credit union?

    The member remains liable for any payments due on a loan or credit card. The member would continue making payments as they did before the credit union failed until they are instructed to do otherwise in writing by the acquiring credit union or the NCUA. If a member's credit union is liquidated and the member has both a loan and shares at the credit union, the NCUA may deduct the loan balance from the share balance.

  • What are digital assets and cryptocurrencies?

    Digital assets are broadly defined as any digital representation of value that is recorded on a cryptographically secured distributed ledger or any similar technology. Digital assets are not fiat currency, as they are not issued by a government entity. Digital assets include, but are not limited to:

    • Convertible virtual currency and cryptocurrency;
    • Stablecoins; and
    • Non-fungible tokens (NFTs).

    Cryptocurrencies are digital assets that can be used as a medium of exchange. Cryptocurrencies are not issued by a central bank, so no central authority (like the U.S. Federal Reserve) manages or upholds their value.

  • Does NCUA share insurance cover digital assets or cryptocurrencies?

    The Share Insurance Fund administered by the NCUA does not insure digital assets or cryptocurrencies. The NCUA insurance only covers insured shares and deposits in the unlikely event of a credit union's failure.

  • What does NCUA's share insurance cover?

    By federal law, the NCUA only insures shares and deposits held in federally insured credit unions, which includes both federal credit unions and the majority of state-chartered credit unions. The NCUA's share insurance coverage applies to accounts such as share drafts, regular shares, share certificates, and certain other accounts offered by a federally insured credit union.

  • Are accounts maintained at other entities that hold digital assets and cryptocurrencies for credit union members covered by NCUA share insurance?

    NCUA share insurance does not cover digital assets or accounts maintained at other entities that hold digital assets or cryptocurrencies for credit union members. The following are not covered by share insurance.

    • The NCUA's share insurance does not cover digital assets or cryptocurrencies offered through third-party vendors to credit union members, nor does share insurance extend to digital assets or cryptocurrency stored or held in custody by a credit union. Federal credit unions are not authorized to serve as a custodian for cryptocurrencies and other digital assets. Whether federally insured, state-chartered credit unions chartered in a particular state have the authority to serve as a custodian for cryptocurrencies and other digital assets depends on state law and regulation. There is no prohibition in the Federal Credit Union Act or the NCUA's regulations preventing federally insured, state-chartered credit unions from conducting this activity, provided the credit union can do so safely and soundly and in compliance with all applicable laws and regulations.
    • The NCUA does not insure assets or accounts issued by any entities other than a federally insured credit union, such as cryptocurrency companies. The NCUA's share insurance does not protect against any such entity's default, insolvency, or bankruptcy, including cryptocurrency custodians, exchanges, brokers, and wallet providers.
    • The NCUA's share insurance does not apply to financial products held at investment companies or investment brokers, such as stocks, bonds, money market mutual funds, other types of securities, commodities, or cryptocurrencies.