Apple Pay fraud?

All the data is encrypted transmitted is encrypted. All the data stored on your Apple Watch is encrypted. The full card number is not stored on your card.

When a transaction is started on her Apple Watch the Secure Enclave generates a token that is only valid for one transaction. So, even if a man in the middle attack was attempted they would only have a token, which is already used.

Apple Pay has never been hacked. There is not even a proof of concept proposed by researchers.

The more likely scenario is your spouse swiped or inserted the chip into a transaction terminal and the data was skimmed. The data is then bundled with personal information from the internet/social media and sold on the Dark Web.

Did the bank indicate if Apple Pay was used?

You’re welcome. If you want information on any of this, please just ask. I’m happy to assist anyway I can.