Not that I know the entire implementation but I believe the phone has secure-element hardware that decouples sensitive material from the rest of the device. Therefore, in theory, attacking “the phone” gives you no access to (say) a credit card number. This should be a relatively small attack surface.
Nope, most android phones (that I'm aware of) lack a dedicated HSM. The iPhone 6+ was I believe the first general consumer phone that shipped with a HSM. Being a linux guy through and through, it is/was the reason I got a 6+ and I couldn't be happier. It isn't perfect, but it is a huge improvement over most other things out there.
Motorolla has the horribly overpriced AME 2000 (ick), and Samsung has the knox platform built standard into most of their stuff (which is very good), but they lack a true HSM. If you're an android user and want a HSM for sensitive data, get one of the Microcrypt SD devices. It is as good as you'll get (and still not as good as an iPhone).
Apple Pay generates a unique credit card # for every transaction, ensuring a compromise of one merchants system will never end up in the ability for hackers to use your card for any other transactions.
Unique card # per transaction is the holy grail of security.
Your claims of somehow compromising confidentiality are also provably false.
There is a reliance on the security of the local device that isn't an issue with cards. Primarily this is more of a social engineering concern anyway, rendering most technical solutions useless.
Last year there was an article how Apple Pay was making it easier for scammers to use cards. I believe this particular vector was patched by having to authenticate that you are trully adding your card via bank authorization. However, Mobile Payment is susceptible to fraud and thieves will find a way.
I doubt the security is greater:
* Phones have a far larger attack surface and are regularly exploited.
* Confidentiality is part of security, and I don't want my purchases tied to the rest of my phone data and identity.