The diagram below shows the differences. Both approaches are very secure, but the implementations are different. To understand the difference, we break down the process into two flows.
2. Basic payment flow
𝐀𝐩𝐩𝐥𝐞 𝐏𝐚𝐲: It doesn’t store any card info. It passes the card info to the bank. Bank returns a token called DAN (device account number). iPhone then stores DAN into a special hardware chip.
𝐀𝐩𝐩𝐥𝐞 𝐏𝐚𝐲: For iPhone, the e-commerce server passes the DAN to the bank.
In the diagram, the red arrow means the credit card info is available on the public network, although it is encrypted.
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You might like this thread “Why is the credit card called 𝐭𝐡𝐞 𝐦𝐨𝐬𝐭 𝐩𝐫𝐨𝐟𝐢𝐭𝐚𝐛𝐥𝐞 product in banks” as well?