An underemphasized feature of Apple’s contactless payments service, Apple Pay, is its remarkable Secure Element hardware. The much more discussed security feature, Touch ID, utilizes biometric technology that registers and responds to a single iPhone user’s fingerprint in order to authorize a transaction. Even more importantly, however, Apple Pay also communicates with a Secure Element chip installed in iPhone 6 devices that acts to safeguard a user’s financial information against fraud and data breaches.
When loading cards into Apple Pay, the Secure Element assigns each a digital token (Device Account Number) and stores only those tokens in the chip. The tokens are used as static proxy account numbers representing the user’s cards. When making payments, the Secure Element then generates a one-time unique dynamic security code for each transaction carried through the payment network. The security code acts as a proxy card code verification (CCV) and verifies that the digital token originated from the correct mobile device, authenticating the transaction.