Apple Pay fraud is on the rise and said to be caused by lax provisioning checks by banks, which some fear may ultimately threaten other mobile payment systems.

When Apple Pay was first unveiled by Apple in October 2014, it was touted for its increased security, thanks to tokenized Device Account Numbers and the Touch ID fingerprint system. However, recent reports indicate that Apple Pay fraud is being caused by lax provisioning checks by banks.

According to reports, criminals have been setting up iPhones with stolen personal information, then calling banks to authenticate a victim's card on the new device. This is so-called "Yellow Path" authentication, in which a card isn't automatically accepted (Green Path) or rejected (Red Path), but requires additional provisioning by the bank to be added to Apple Pay.

If this provisioning is successful, the bank will then beam an encrypted version of the card details to be stored on the Secure Element of the phone. Yet at the heart of the problem is that some banks have lax Yellow Path processes, only asking for the last four digits of a Social Security number, leading to criminals using stolen identities and credit/debit cards to purchase high-priced goods, often from Apple Stores.

Fraud in the Yellow Path is growing like a weed, and the bank is unable to tell friend from foe. No one is bold enough to call the emperor naked. Cherian AbrahamMobile commerce and payments lead at Experian Global Consulting

Avivah Litan, vice president and distinguished analyst for research firm Gartner Inc., based in Stamford, Conn., said that this kind of fraud is a fundamental flaw that will affect all mobile payment services.

"This isn't necessarily an Apple Pay problem. The responsibility ultimately lies with the card issuer who must be able to prove the Apple Pay cardholder is indeed a legitimate customer with a valid card," Litan wrote in a blog post. "That always appeared to me to be the weakest link in mobile commerce -- making sure you provide the app to the right person instead of a crook."