Some banks have begun to make changes in how they activate customers' credit-card accounts to use Apple Inc.'s new mobile-payment system after reports of fraudulent transactions, according to industry consultants.
The effort is an attempt to thwart criminals who have been typing stolen credit-card numbers into Apple Pay and trying to make purchases with their iPhones.
The breaches follow Apple's October introduction of the service, which lets owners of the new iPhone 6 and 6 Plus load their credit and bank cards on their smartphones and use them to make purchases at cash registers equipped with a proper wireless connections.
"This is a black eye that needs to heal through improved authentication procedures," said Richard Crone, chief executive officer of Crone Consulting LLC. Some banks are now requiring users to call them to activate Apple Pay, to ensure that their identities haven't been stolen, he said.
"It comes down to making sure that the data that is being provisioned to a device is to a device of a cardholder," said Al Pascual, director of fraud and research at Javelin Strategy & Research, who also was aware of some banks making changes to their activations.
Major banks and credit-card companies teamed up with Apple to develop Apple Pay, which uses the world's largest payment networks' tokenization products, a system that replaces some account information with a digital ID for online and mobile purchases.
"Apple Pay is designed to be extremely secure and protect a user's personal information," the company said Thursday in an e-mailed statement.
Apple Pay is one of several new services being introduced by the Cupertino, California-based technology company as it looks to encompass more of its users' digital lives.
The mobile payment market is expected to rise to $142 billion in 2018 from $52 billion last year, according to Forrester Research.
Financial institutions, such as First Tech Federal Credit Union, have seen fraudulent transactions since introducing Apple Pay.
"There's still some ability to have some fraud on a transaction, we are seeing a little bit of that," said Terry Rodrick, vice president of cards and payments at the credit union, which serves 387,000 people.
Some issuers have found as much as 8 percent of Apple Pay transactions to be fraudulent, compared with 0.1 percent on traditional payments cards, Julie Conroy, an analyst at Aite Group, said in an interview. Card issuers have had to absorb the losses.