14 ms·

Follow the money: Apple vs. the FBI

534 points by cstross 11y ago

guard-of-terra 11y ago
It is about our freedoms and we've got to defend them!
thomasahle 11y ago
TL;DR: Apple wants us to trust them, because they want to build a bank.
- coldtea 11y ago
  Actually, go read the article. It's worth it, and has much more nuance than this.
  - dipnuggetron 11y ago
    https://news.ycombinator.com/item?id=11370189 https://news.ycombinator.com/item?id=11370189
HappyTypist 11y ago
Apple becoming a bank makes some sense. It can start quite innocuous, with iTunes balances being integrated into Apple Pay somehow. Soon, allow transferring such credit between users. "Gift your friends iTunes credit right from the app."
adventured 11y ago
> Its legendary $120-150Bn in cash For all the dramatic prose in this article about Apple's finances, they managed to miss by a fair bit on how much cash Apple has. It's closer to $215 billion. $16.6b in cash or equiv, $21.3b in short-term, $177b in long-term marketable securities (most of which can be converted to cash relatively quickly, so when calculating Apple's cash pile that is commonly included). If you remove their $53b in long-term debt (which has a very low interest cost on it) you get $162b. The article didn't specify that it was subtracting debt of course.
venomsnake 11y ago
FBI only needs Apple signing keys. And as lavabit showed - they can compel Apple to produce them. Apple are a big company - they cannot be trusted by default. And banks right now make their money in two ways - gambling with the money of the rich and using all kind of creative late fees to prey on the poor. Neither of those requires uber secure pocket ATM.
- adventured 11y ago
  That's incorrect. The major US banks today do not primarily make their money from either gambling with the wealth of rich people, or from low income banking. Not even remotely close. The second largest business for Wells Fargo - America's most valuable bank - for example, is wholesale banking from businesses with at least $20m in sales, where they get about 35%-40% of their profit. You'll find that an extremely small percentage of profit is derived from 'the poor' in Wells Fargo's business (the same holds true for Citi, BofA and JP Morgan). Their community banking segment, which targets the median and higher, is their prime profit center, contributing about 60% of their profit. You don't earn $23 billion per year in profit on late fees from the poor, very few of whom have accounts with Wells Fargo to begin with. One very quick look at the largest financial services companies that do target the relatively poor, reveals how little profit there is in that segment compared to what the big banks do. It doesn't scratch the surface for a company the size of Wells Fargo.
  - forgotpwtomain 11y ago
    > That's incorrect. The major US banks today do not primarily make their money from either gambling with the wealth of rich people, or from low income banking. Not even remotely close. For US banks - 42.3 billion collected in account fees over 12 months, 32.5 billion of which were over-draft fees. So yeah, quite a bit of it they do.* [0] time.com/money/4071290/bank-overdraft-charges-fees/
johnloeber 11y ago
I'm sceptical about this. The reason is that all banks in the US are subject to rather stringent know-your-customer regulation. They have to obtain documentation on their clients, which by law can be shared with the authorities. As far as I know, this makes it rather simple to trace the flow of money, at least domestically. If Apple were to become a bank, I don't see how they would get around those regulations. In fact, I'm pretty sure that once Apple were to become a major financial institution, the authorities would certainly ask for access to data on financial flows -- and given the state of legal affairs, might have a much stronger case. (Remark: I'm sceptical about Apple wanting to become a bank being the reason for the Apple vs. FBI conflict. I think it is nonetheless plausible for Apple to become a bank.)
- a_imho 11y ago
  I would second your remark. I think this issue is more complex with many more interests in play and Apple can create various advantages from appealing more trustworthy to customers. Nevertheless I'm very opinionated that none of the major causes is being genuinely concerned about privacy (until it is theirs) as some were championing them, especially their CEOs.
- nl 11y ago
  That doesn't conflict with his argument, which doesn't really make sense until the final paragraph. He's arguing that the FBI backdoor would introduce an unacceptable backdoor into a hypothetical Apple "Bank" which bad guys could exploit. Not sure I agree with that argument either, but it is orthogonal to your valid point about know-your-customer.
  - cdubzzz 11y ago
    I think the argument is a bit more vague than that, quote the article: "And this is why Tim Cook is willing to go to the mattresses with the US department of justice over iOS security: if nobody trusts their iPhone, nobody will be willing to trust the next-generation Apple Bank [...]" All the author is talking about is a general perception of trust, not any actual backdoor.
draw_down 11y ago
It's an interesting line of thought but I feel like there is no indication Apple execs really think this way. It still seems to me like they think they're a consumer electronics company. Tim Cook and Jony Ive slavering over entering the financial industry, I just don't see it. When you're analyzing something, "follow the money" is always good advice. But I think it's much simpler here, following the money just means that at this point, Apple is the iPhone company, and they're going to do everything they can to guard that business. That's why they went so berserk with lawsuits regarding Android.
- meric 11y ago
  They are into cars, too.
  - foxhedgehog 11y ago
    Which are essentially consumer electronics in 2016.
  - draw_down 11y ago
    Yeah, that's what I said.
- meric 11y ago
  They are into cars, too.
- forgetsusername 11y ago
  >It still seems to me like they think they're a consumer electronics company It's their bread and butter, obviously. But as the article makes clear, there is a specific type of problem associated with having as much money as Apple does, and it becomes a business in itself trying to manage those finances. Eventually, if it hasn't already, that management becomes the business, whether Jony Ive wants it to be or not.
  - draw_down 11y ago
    Still, an executive can only do so much in a day and I imagine their time is used up on the electronics they make. The argument here is that they were literally thinking and acting as a bank in response to the FBI's actions.
l33tbro 11y ago
I just don't see it. Haven't we learnt over the last few years that consumers just don't seem to give a shit about their data? Conversely, even Apple not handing over keys to the FBI still doesn't put privacy-concerned folks like us at ease about an Apple Pay service (my peers and I, at least). I actually kind of see it as being of no importance which way the coin falls here on what's been triggered by the San Bernardino case. The security oblivious will remain oblivious regardless of the outcome (identity politics and the Kardashians are far more compelling than encryption). Equally, the skeptical amongst us will remain skeptical - even if Cook holds onto the Iphone encryption we'll always be suspicious of backroom deals or potential backdoors. Whatever the fallout, neither scenario infringes on the legitimacy of Apple as a financial institution - should that even be their play.
- artimaeis 11y ago
  I'm curious what your privacy concerns are regarding Apple Pay. Tokenized authentication seems notably more secure than any of the traditional card-based offerings. The seller only gets what you permit them to have, which in most cases is simply the token for the transaction to hit whatever card or bank account you have tied to it. The only reason merchants can ask for more, as far as I'm aware, is for shipping related purposes. If there's more to it though I'm certainly curious to know!
- coldtea 11y ago
  >I just don't see it. Haven't we learnt over the last few years that consumers just don't seem to give a shit about their data? No, when it comes to their banking accounts and e-wallets, we haven't.
  - howeyc 11y ago
    Every user of Mint is evidence to the contrary, no matter what their lips say.
    - coldtea 11y ago
      Given access to your financial info to a third party is not the same as being OK with said party being insecure.
peyton 11y ago
It seems more likely Apple wants leverage over banks to cut exclusive deals in order to sell more devices. The retail banking industry suffers from low consumer satisfaction, as it earns the bulk of its profits via fees, personal loans, and mortgages. Apple historically wants no part of that. Competing on margin by mitigating fraud doesn't make sense.
gopher2 11y ago
Not just Apple Pay or being a bank, also about health data and about being trusted in other markets than United States. Good article, though.
crdoconnor 11y ago
This doesn't add up. The biggest asset that the US TBTF banks have right now is their tight relationship with the federal government. Apple could certainly start competing on their home turf with respect to payments and checking accounts, but there's very little profit in that.
girkyturkey 11y ago
I completely understand why Apple is not backing down on this. Even if this backdoor is for one phone, the possibility of having that backdoor stolen is too great a risk to produce. When looking at the big picture, Apple is looking at the side effects this backdoor could produce and doesn't want to take the risk. I can hardly blame them either!
- lazylester 11y ago
  seems to me the risk of having the backdoor stolen is an overstated vulnerability. Isn't it the same risk as having the iphone source code stolen? Hasn't happened yet has it? If the source code were stolen, someone else could engineer a backdoor. I don't think the overall security risk increases by the existence of a backdoor on a single phone. Amiwrong? That said, I'm happy that Apple is pushing back, but let's be clear about the technical facts.
  - fucking_tragedy 11y ago
    To be clear about the technical facts: good luck pushing that engineered backdoor to an iPhone without Apple's keys. Having your source code stolen gives your competitors an edge by letting them know, for free, how you've implemented things that might have cost you millions/billions to research and produce. The biggest threat to having source code stolen is exposing the potentially embarrassing paperclips, string and gum holding a product together. > Hasn't happened yet has it? Years ago and at the time the most profitable software company, Microsoft had its flagship products, the NT kernel and Windows 2000, source code leak. It isn't unheard of. > I don't think the overall security risk increases by the existence of a backdoor on a single phone. If the precedent is set for this single phone, then the security of other phones is at stake. This is also a red herring. It is not about this singular phone. edit: You do not need the source code to find a backdoor or vulnerability[0] [0] every closed-source product that's ever been exploited
dood 11y ago
Putting on cyberpunk goggles, you could take the idea a step further and speculate that Apple is preparing to become a transnational entity, and doesn't want pesky nation-states dragging it down. They already have revenue around the GDP of Hong Kong or Israel.
- snowwrestler 11y ago
  The cyberpunk were wrong; the Internet has made nations stronger than ever. The NSA hacks Google and Apple, not the other way around.
  - aplummer 11y ago
    Don't you get it, that's what they want you to think.
- hawleyal 11y ago
  That already happened.
pksadiq 11y ago
Hm... An article with no concrete proof. Then, here is my story about Apple vs FBI (sceptical too). FBI (really, NSA) knows of only one phone (company) that is easily crackable, and its IPhone. So Why a sue? This has to be taken utmost care. When FBI sues against Apple, and they say they can't crack (some say, hack), people think that its true, and they trust more in Iphone. Result: More sales for Iphone. FBI (NSA) has more phones crackable. Benefit is for both. So Why Android is less crackable? Answer: It's not. But a user can easily replace it OS with something safe (like, another android like replcant OS). So, FBI (NSA) shall have to try harder to break into. So why not windows phone? Hm... You should not store any obsolete data in your mind. Thank you.
- RubyPinch 11y ago
  except the FBI changed course, not only saying that the iphone was hackable, but that it was hackable by groups other than the government, which, if someone valued their privacy, they would probably find that statement concerning
baldajan 11y ago
I actually think this article is a bit narrow minded. Apple wants the phone to be your central hub (and has succeeded). You can't live without your phone. You use it for a medical study, for private messaging, for intimate photos, etc. making it compromised and easy to crack would bring halt to that thinking and make the phone's utility moot. It's not about Apple wanting to become a bank, for the same reason they aren't a carrier.
- neikos 11y ago
  I am unable to imagine that. For me, my phone is an annoyance. It interrupts me, the only thing it has that is useful for me is mobile internet (that I use rarely), emergencies, and music. How can one get so dependent on a piece of technology you ultimately do not really own?
  - donkeyd 11y ago
    > a piece of technology you ultimately do not really own You can just buy a phone in cash, then you own it. Not owning your phone is a choice. Even if you're on a contract (at least here in the Netherlands), the phone is often legally yours, you're just paying it off.
    - pdkl95 11y ago
      If Apple (or anybody else) controls root access to the phone or if they can force software updates onto the phone, then you don't actually own the phone.
      - sean-duffy 11y ago
        I'm not sure that logic really holds, what part of the definition of ownership specifies this? If you drive your car without insurance it can be forcibly taken from you, does that mean nobody truly owns their car?
        pdkl95 11y ago
snowwrestler 11y ago
This makes no sense. In order to act like a bank, Apple would have to track every financial transaction centrally in order to provide for auditing and reconciliation. There are already plenty of laws that give law enforcement the power to subpoena that info. Strong device security is no impediment at all if Apple is a bank.
- empath75 11y ago
  Not if they put crypto currency wallets in there.
pdkl95 11y ago
Susan Landau, during[1] the House Judiciary Committee hearing: Smart phones are increasingly wallets, and they give us access to all sorts of accounts [...]. NSA will tell you that stealing login credentials is the most effective way into a system. [...] Here's where smart phones are extremely important: they are poised to become authenticators to a wide variety of services. While I think that Apple has good reasons to fight the FBI's order for simple constitutional reasons, they obviously are not limited to a single motive. This comment about phones being "wallets" does fit with the idea of Apple being some sort of bank (or payment processor). [1] https://www.youtube.com/watch?v=g1GgnbN9oNw#t=12977 https://www.youtube.com/watch?v=g1GgnbN9oNw#t=12977
- krrrh 11y ago
  Wallets is too limited though. Increasingly a phone is not only a wallet replacement, but also a replacement for filing cabinets, bookshelves, photo albums… to the point where having unfettered access to a smartphone is akin to having access to someone's living room and office.
  - pdkl95 11y ago
    > photo albums Dr. Landau mentions this kind of use just prior to my t=12977 link to the hearing. I'm specifically quoting the part that seemed relevant to Stross's banking theory.
crusso 11y ago
If the FBI get what they want, then the back door will be installed and the next-generation payments infrastructure will be just as prone to fraud as the last-generation card infrastructure, with its card skimmers and identity theft. How Stross made the leap from a special version of the OS that the FBI could use to eventually crack a password to the easy clone-on-use nature of a card skimmer is completely farcical and looks like something that the mainstream non-tech press would come up with. Just as prone to fraud? I don't understand the need for that kind of hyperbole in an article that looks like it was intended to be taken seriously.
- merpnderp 11y ago
  Look I dislike that kind of hyperbole also. But I think there is a clearly defined middle step. If the FBI can force Apple to create a new OS. They can force them to install backdoors in every new OS. Then the phones become "...just as prone to fraud as the last-generation card infrastructure." And given Juniper systems was likely a government placed backdoor, there is ample evidence this is true.
- xigency 11y ago
  Probably more related to the concerns that a judge would compel Apple to turn over their source code and signing key to software, which basically gives the government and any agent with access unlimited authority to tamper with Apple software and devices. Cracking passwords is also bad.
ikeboy 11y ago
>The FBI thought they were asking for a way to unlock a mobile phone, because the FBI is myopically focussed on past criminal investigations, not the future of the technology industry, and the FBI did not understand that they were actually asking for a way to tracelessly unlock and mess with every ATM and credit card on the planet circa 2030 (if not via Apple, then via the other phone OSs, once the festering security fleapit that is Android wakes up and smells the money). Except the phone they were asking is a 5C, which doesn't support Apple Pay because it doesn't have a secure enclave or fingerprint reader. Risk management: call me back when they figure it out. http://www.nytimes.com/2015/03/17/business/banks-find-fraud-abounds-in-apple-pay.html http://www.nytimes.com/2015/03/17/business/banks-find-fraud-...
- ubernostrum 11y ago
  Risk management: call me back when they figure it out Quoting article you linked: "the banks may largely have themselves to blame." Apple Pay appears to be a secure system, and was designed by engineers to be such. The process of getting a credit card loaded into Apple Pay appears to be a woefully insecure system, and was designed by banks to meet the bare minimum of regulatory compliance and no more. Some banks actually perform some due diligence; one of my cards, when I added it on my phone, required some verification steps to prove to the issuing bank that I was indeed the cardholder I was claiming to be. But another simply loaded onto the phone instantly with no verification. It doesn't take me long to figure out how that leads to fraud.
  - ikeboy 11y ago
    >Because Apple wanted its system to have the simplicity for which it has become famous and wanted to make the sign-up process “frictionless,” the company required little beyond basic credit card information about a user. >Some bank executives acknowledged that they were were so scared of Apple that they didn’t speak up. The banks didn’t press the company for fear that they would not be included among the initial issuers on Apple Pay. Sounds like there was pressure from Apple. Regardless, there's absolutely no sign of the security claimed by OP. You'd at least expect parity security, not an order of magnitude more.
martin_drapeau 11y ago
Apple Pay sits on top of the credit card industry. Do you believe they will remove that layer one day, and tie directly to your bank account? As I understand the payment industry is incestuous and has become a commodity. Its ripe for anyone to replace it. Apple seems to be in a good position to do that over time.
- snowwrestler 11y ago
  I don't know why they would bother. Apple Pay as architected now outsources all the pains in the butt to the existing payment processors: getting terminals into stores, dealing with chargebacks and fraud, and providing regulatory compliance. Apple gets to deal only with with their existing customer base, take a tiny tax for authenticating transactions, and enhance the value perception of the iPhone and Watch, which is where they actually make their money.
  - martin_drapeau 11y ago
    Credit Cards, issuers, acquirers, gateways, etc - the whole payment intermediary grabs around 3%. Most of that could all go to Apple one day. Why leave it on the table?
- jagermo 11y ago
  I think Rogers in Canada has already done that, haven't they? It might be hard, but it is not impossible to get a banking licence, if you have the money for it.
  - martin_drapeau 11y ago
    Apple doesn't have to become a bank. There is a lot of money to be made sitting between the bank and the customer (2%~5% of a transaction). Today, VISA and Mastercard grab most of that. Apple could replace them. In a few years, there will be more Apple devices with Apple Pay than issued VISAs. When Apple Pay is accepted everywhere, credit cards will be doomed.
mattiemass 11y ago
I think the premise of following money is interesting, but the conclusion I completely disagree with. I believe Apple's focus on privacy is a direct challenge to Google's business model. Apple makes all their money from mobile device sales, don't they?
- petra 11y ago
  But maybe the growth in the phone business is limited - so they look for various services like music/tv, and banking could be one such service.
ansy 11y ago
The FBI already has incredible insight into banking transactions. This would not be an extraordinary power for them. The reason Apple is being defensive is because of Edward Snowden. Apple supplies smart phones to the WORLD. Putting on a strong front to the FBI is a PR boon for selling smart phones abroad. They don't want the rest of the world to make a trusted Android fork because they can't trust Google and Apple. They want them to trust and buy Apple products! Unlocking that smart phone would cost Apple billions in foreign purchase orders.
- nxzero 11y ago
  Curious, what do you make of China's demands on Apple related to the "security" of iOS and the iPhone? Why do you believe this hasn't cost Apple billions in foreign purchases?
- mangeletti 11y ago
  > The FBI already has incredible insight into banking transactions. This would not be an extraordinary power for them. So, since the FBI has that insight now, it's inconsequential for them to have it in the future? Where did you come up with this logic?
- SkyMarshal 11y ago
  >Apple supplies smart phones to the WORLD. This has been my assumption from the start of this case too. Apple can't afford to lose China, if only for the purpose of avoiding negative quarterly growth reports. Becoming known by the Chinese to be hackable by the FBI, wouldn't go over well there.
  - x0x0 11y ago
    Not to mention the (obvious, ugly) next step: every country in the world demands the exact same privileges the fbi get. And why shouldn't they? This may not be avoidable. Even blackberry had to do this ([1], dozens more). But if anyone has strong enough market power to push governments towards privacy, it's apple. [1] http://www.theguardian.com/technology/2010/aug/10/blackberry-saudi-arabia-ban-lifted http://www.theguardian.com/technology/2010/aug/10/blackberry...
blinkingled 11y ago
It's too far fetched esp given a very simple incentive exists for Apple to be pro-privacy - market differentiation. Given Tim Cook's background he may also truly believe in privacy for the masses but that's a byproduct. Apple knows that with all their competitors slowly but steadily stepping up their game and offering solid smartphones for 1/3rd of the iPhone's price and little practically left to do for Apple to stand out in non-USA markets, privacy is their one big appeal. That plus lower priced iPhones and Apple's brand value practically guarantee that Apple will stay ahead - take out one leg and it starts to look shaky. I think they'll continue to emphasize it to sell iPhones until they find another market that's as lucrative as the iPhone is.
fweespee_ch 11y ago
As much as I like Antipope, I think he is overestimating the long term thinking of the Apple business because the time to have started the "Apple Bank" process is 2014 because they should have just acquired Simple: http://techcrunch.com/2014/02/20/simple-acquired-for-117m-will-continue-to-operate-separately-under-its-own-brand/ http://techcrunch.com/2014/02/20/simple-acquired-for-117m-wi... Then moved on from there and making it into "Simple, The Apple Bank". The fact they didn't move in that direction makes me think it never really occurred to them.
martin_drapeau 11y ago
I don't think Apple will become a bank. They could however replace VISA and Mastercard in the long term, and grab the 2% to 5% of payment fee over each transaction. Vertical integration to its best. To get there, merchants need to support Apple Pay, and Apple needs to continue selling phones. In the near future, there will be more Apple Pay enabled devices in circulation than VISAs and Mastercards. When the scale tips, credit cards will be doomed.
- TheLogothete 11y ago
  Don't you need credit cards to use apple pay?
  - dyladan 11y ago
    Sure, now. In 5 years who knows? I could definitely see AAPL partnering with visa/mastercard/amex or even directly with banks for direct account access on a program that doesn't require a physical card. Plastic cards will become the new cash (right now cash-only businesses are a little behind the times but they still exist) and phone payments will become the new plastic.
    - TheLogothete 11y ago
      Partnering? Sure! I think this will be the way forward, but the GP says Apple is out to get VISA and MC (as companies) and will leapfrog them with one clean swoop. This will most definitely not happen.
  - The_Magistrate 11y ago
    Currently, yes. The article is positing that once Apple has the infrastructure in place for end-to-end transactions, removing the VISA/MC puzzle piece will be easy. Ultimately, you'd put money into an Apple account and spent it on your iPhone.
    - TheLogothete 11y ago
      I don't think you are very familiar with how the payments industry works. Credit cards offer much more than a means to pay. Apple will need to double their headcount to compete with Visa. Or do you think that this is a feasible scenario?
YeGoblynQueenne 11y ago
>> Their phones are, in many respects, more secure than the ATMs and credit card infrastructure we've used to accessing our bank accounts. Well, except that the ATM doesn't permanently store your credentials, potentially[1] making them available to anyone who takes possession of it. Not to mention: it's possible, though not easy, to take possession of a whole ATM. However, the people who have done so were after the bank's money, not your money. Whereas if someone steals your device they're potentially[1] getting hold of your money. _____________________ [1] Read: it's only a matter of time.
nsedlet 11y ago
The logic in this article seems confused to me. The central business problem for retail banks is how to earn more from deposits than they pay in interest, and to do so at a scale of billions of dollars. Apple also needs to figure out how to make money from its pile of cash. Accepting deposits and becoming a bank would only make that problem worse - so how is "having lots of cash" evidence that Apple wants to be a bank? An investment bank is a different animal and I would strongly disagree with the author that Apple is a "de facto investment bank". Investment banks advise clients on financial transactions and help clients hedge risk (something Apple doesn't do). There are much more straightforward and compelling explanations for why Apple cares about security (as others in this thread have pointed out). The only thing I would slightly agree with is that Apple maybe has an eye toward building its own payments network (a payments network is NOT a bank, by the way). But Apple isn't even CLOSE to competing with Visa and MasterCard in that regard - even if it did disintermediate the credit card companies it would have to have much much larger consumer adoption of Apple Pay plus a merchant network. Honestly the tone and muddled structure of this article come off as a poorly substantiated conspiracy theory.
- TheLogothete 11y ago
  Why is this article even on the front page (#1 even) of HN? Is this guy famous? His article is pure ramblings and defies common sense.
  - DanBC 11y ago
    Charles Stross is an author, and has written some (really good) SF that covers some stuff in a way that HN appreciates. He's also a member here, and sometimes comments. http://www.amazon.co.uk/Charles-Stross/e/B001H6IW0Q/ref=sr_tc_2_0?qid=1459176293&sr=8-2-ent http://www.amazon.co.uk/Charles-Stross/e/B001H6IW0Q/ref=sr_t... http://www.amazon.com/Charles-Stross/e/B001H6IW0Q/ref=sr_tc_2_0?qid=1459176293&sr=8-2-ent http://www.amazon.com/Charles-Stross/e/B001H6IW0Q/ref=sr_tc_...
    - dredmorbius 11y ago
      He submitted this item himself. Sneaky bastard.
oldmanjay 11y ago
What is the purpose in speculating the one true reason that Apple is doing this? They're a massive company with many needs and desires, so there are probably many interlocking factors here. Chasing the simple narrative is a very human game, but it's not really purposeful, it's just play.
rvooda 11y ago
There are many theories in this post, but no facts. As the comments depict, becoming a bank will only make things harder and if someone trying to get profits out of a product or a service is wrong, then everything in this world is wrong. You are talking about legacy software used by banks. Are you trying to say that we should not advance in financial systems? Or are you saying that they are superficially unbreakable?
- neotek 11y ago
  I think the author is saying neither of those things, but that bank software is pretty much uniformly rooted in the stone age, updates come at a glacial pace, and Apple could use its significant software engineering prowess to build something substantially better. He gives the example of Apple being in a better position to detect fraud, for instance, by virtue of the fact that Apple knows where your phone / watch is, and by extension where you are, compared to a credit card company that only knows where your card has been used.
julie1 11y ago
The elephant in the room is we are building a new religion based on technology. FBI & Apple are both stupid. Computers always ends up to be used in a real physical world. This is called the analogic hole. This has since decades enable to weaken crypto with side channels (temperature of CPU, times of computation, EM radiation, noise of the keys...). And how useful is it to spend billions of dollars to break new technologies when at the end human will still interact with computers with analog means? Microphones, cameras are still working. And it covers 30% of the surface of what a secret service requires to be able to know. And cold war has left government with more than enough cheap efficient technologies. Being smart and foxy covers 15%. 5% is PURE LUCK. Science is about aligning the cost of detection with its efficiency. Crypto is efficiently made so that breaking algorithms is more and more costly. Detection by measure/math is always failing at one point. (false positive/negative) And what about the remaining 50% ? It is HUMINT. When people love the place where they live and trust their government they are more likely to snitch the criminals. To help keep the social peace. Yes, social concord is what protect a nation. People feeling united and trusting their own governments. I think that electronic intelligence is counterproductive. I also believe we would live in a better world if laws and moral where in sync with who we really are. If we did not required secrecy to be who we are because governments made illegal stuff that are not crime, except in the eyes of a minority. Education could help too; people when fearful are behaving like dangerous trapped animals. Education purpose is not about making citizens obedient or fearful, it is about making them able to become political leaders themselves. Every citizens should be trained in the optic they will be a member of the parliament. The next Benjamin Franklin, Roosevelt, JFK, Lincoln ... USA has beaten the former colonial power with education. Scientific education. It could be time USA become a great nation again.
Jerry2 11y ago
>Early iterations of the iPhone notoriously lied about the security of SSL connections to email servers; my understanding is that this led to them being banned from some corporate and government accounts for a few years. What? Never heard about this. Is he bullshitting about this or is there some validity behind this claim?
- bendbro 11y ago
  I found a number of articles referencing this IOS 4.2 SSL vulnerability. http://www.peterbance.co.uk/information-security-articles/ssl-vulnerability-in-apple-ios/ http://www.peterbance.co.uk/information-security-articles/ss... It's somewhat difficult to find the event on Google due to results of the search being masked by the last IOS "goto fail" SSL vulnerability. http://arstechnica.com/security/2015/04/critical-https-bug-may-open-25000-ios-apps-to-eavesdropping-attacks/ http://arstechnica.com/security/2015/04/critical-https-bug-m... While I'd imagine this is open to some interpretation, IOS is the least secure mobile OS, at least in terms of the number of vulnerabilities it has. It is not worth believing it is immume from the same failings of other OSes. http://venturebeat.com/2015/12/31/software-with-the-most-vulnerabilities-in-2015-mac-os-x-ios-and-flash/ http://venturebeat.com/2015/12/31/software-with-the-most-vul...
  - Jerry2 11y ago
    None of those links address the claim about SSL and email. And iOS4 is not an "early" iPhone.
    - bendbro 11y ago
      I wanted to come back and say I was too quick to judge on the vulnerability article. This data doesn't indicate whether bugs were found and patched internally, or were actually exposed first by malware.
ibn-alfatal 11y ago
Around 2030 there will likely be a quantum computer running Shor's algorithm efficiently.
matt_wulfeck 11y ago
What if what it's really about is that Tim Cook values privacy more than his predecessor and thinks it's important that his products reflect that value? Given his position and the overreaching request by the FBI, I think most of us privacy-conscious HNers would behave the same.
tryitnow 11y ago
This makes sense to me at a high level. A bit too wordy for my tastes but yes, if I were Apple I'd want to be super secure in part because I want to be big player in the payments arena. Although it makes it's not particularly revealing. Yes, companies want more control over security because that allows them to pursue business opportunities. No need to even follow the money here, it's just common sense.
pfarnsworth 11y ago
No. The reason why Apple cares is because if everyone knew the US government could snoop on their messages and iPhone information at will, no one around the world would buy iPhones or Apple products again, due to the halo factor. It would be instant death. So Apple needs to tell the world that their information is secure from every government. Otherwise they will be out of business.
- mercurial 11y ago
  I fail to see the pitchfork-wielding crowd making its way to to the parliament of all western countries engaged in large-scale snooping (that is, most or all of them). Probably because people don't give a damn about the government reading their mail ("I have nothing to hide"/"Google is already reading it anyway").
Tloewald 11y ago
There's a certain group of people who seem determined to see some Machiavellian motives behind Apple defending the security of its (and everybody's) encryption. It's not just about making money. It's not just a marketing pitch. It's not just because it's technically stupid to do what the FBI wants. It's not purely driven by Apple's concern for its customers. It's all of those things at once. Everyone in the industry thinks the FBI is being boneheaded. The current and former heads of the NSA think the FBI is being boneheaded. Google, Microsoft, and Amazon. You don't need to look behind the obvious motives for something underhanded. It's. freaking. obvious.
jswny 11y ago
Apple has an obligation as a financial institution to win this case. Apple is a business, and it has customers who won't want to buy phones which they know are purposefully compromised from a security standpoint. In addition, those customers don't want to buy phones for which the US government has unlimited access to. Apple has a financial interest to keep their devices as secure as possible and act in the interests of their customers, the ones who drive their business.
known 11y ago
1. Regulate market capitalization 2. Tax corporate revenues
jimminy 11y ago
Apple is already operating a private hedge fund to deal with their excess capital. https://en.m.wikipedia.org/wiki/Braeburn_Capital https://en.m.wikipedia.org/wiki/Braeburn_Capital
stretchwithme 11y ago
I think Apple's motivation to maintain security a lot simpler. Apple had to demonstrate to the Chinese government that its devices were secure and could not be used to spy on Chinese users. If Apple gives up on that, they'll lose those sales.
dm_mongodb 11y ago
this in no way effects whether one is trusted for payments.
Steko 11y ago
> unlike the banks and the credit card settlement network they're not running on incrementally upgraded legacy infrastructure designed in the 1950s Good point, Apple's incrementally upgraded legacy infrastructure was designed in the 1990s.

534 points by cstross 11y ago

guard-of-terra 11y ago

It is about our freedoms and we've got to defend them!

thomasahle 11y ago

TL;DR: Apple wants us to trust them, because they want to build a bank.

coldtea 11y ago
Actually, go read the article. It's worth it, and has much more nuance than this.
- dipnuggetron 11y ago
  https://news.ycombinator.com/item?id=11370189 https://news.ycombinator.com/item?id=11370189

HappyTypist 11y ago

Apple becoming a bank makes some sense. It can start quite innocuous, with iTunes balances being integrated into Apple Pay somehow. Soon, allow transferring such credit between users. "Gift your friends iTunes credit right from the app."

adventured 11y ago

> Its legendary $120-150Bn in cash For all the dramatic prose in this article about Apple's finances, they managed to miss by a fair bit on how much cash Apple has. It's closer to $215 billion. $16.6b in cash or equiv, $21.3b in short-term, $177b in long-term marketable securities (most of which can be converted to cash relatively quickly, so when calculating Apple's cash pile that is commonly included). If you remove their $53b in long-term debt (which has a very low interest cost on it) you get $162b. The article didn't specify that it was subtracting debt of course.

venomsnake 11y ago

FBI only needs Apple signing keys. And as lavabit showed - they can compel Apple to produce them. Apple are a big company - they cannot be trusted by default. And banks right now make their money in two ways - gambling with the money of the rich and using all kind of creative late fees to prey on the poor. Neither of those requires uber secure pocket ATM.

adventured 11y ago
That's incorrect. The major US banks today do not primarily make their money from either gambling with the wealth of rich people, or from low income banking. Not even remotely close. The second largest business for Wells Fargo - America's most valuable bank - for example, is wholesale banking from businesses with at least $20m in sales, where they get about 35%-40% of their profit. You'll find that an extremely small percentage of profit is derived from 'the poor' in Wells Fargo's business (the same holds true for Citi, BofA and JP Morgan). Their community banking segment, which targets the median and higher, is their prime profit center, contributing about 60% of their profit. You don't earn $23 billion per year in profit on late fees from the poor, very few of whom have accounts with Wells Fargo to begin with. One very quick look at the largest financial services companies that do target the relatively poor, reveals how little profit there is in that segment compared to what the big banks do. It doesn't scratch the surface for a company the size of Wells Fargo.
- forgotpwtomain 11y ago
  > That's incorrect. The major US banks today do not primarily make their money from either gambling with the wealth of rich people, or from low income banking. Not even remotely close. For US banks - 42.3 billion collected in account fees over 12 months, 32.5 billion of which were over-draft fees. So yeah, quite a bit of it they do.* [0] time.com/money/4071290/bank-overdraft-charges-fees/

johnloeber 11y ago

I'm sceptical about this. The reason is that all banks in the US are subject to rather stringent know-your-customer regulation. They have to obtain documentation on their clients, which by law can be shared with the authorities. As far as I know, this makes it rather simple to trace the flow of money, at least domestically. If Apple were to become a bank, I don't see how they would get around those regulations. In fact, I'm pretty sure that once Apple were to become a major financial institution, the authorities would certainly ask for access to data on financial flows -- and given the state of legal affairs, might have a much stronger case. (Remark: I'm sceptical about Apple wanting to become a bank being the reason for the Apple vs. FBI conflict. I think it is nonetheless plausible for Apple to become a bank.)

a_imho 11y ago
I would second your remark. I think this issue is more complex with many more interests in play and Apple can create various advantages from appealing more trustworthy to customers. Nevertheless I'm very opinionated that none of the major causes is being genuinely concerned about privacy (until it is theirs) as some were championing them, especially their CEOs.
nl 11y ago
That doesn't conflict with his argument, which doesn't really make sense until the final paragraph. He's arguing that the FBI backdoor would introduce an unacceptable backdoor into a hypothetical Apple "Bank" which bad guys could exploit. Not sure I agree with that argument either, but it is orthogonal to your valid point about know-your-customer.
- cdubzzz 11y ago
  I think the argument is a bit more vague than that, quote the article: "And this is why Tim Cook is willing to go to the mattresses with the US department of justice over iOS security: if nobody trusts their iPhone, nobody will be willing to trust the next-generation Apple Bank [...]" All the author is talking about is a general perception of trust, not any actual backdoor.

draw_down 11y ago

It's an interesting line of thought but I feel like there is no indication Apple execs really think this way. It still seems to me like they think they're a consumer electronics company. Tim Cook and Jony Ive slavering over entering the financial industry, I just don't see it. When you're analyzing something, "follow the money" is always good advice. But I think it's much simpler here, following the money just means that at this point, Apple is the iPhone company, and they're going to do everything they can to guard that business. That's why they went so berserk with lawsuits regarding Android.

meric 11y ago
They are into cars, too.
- foxhedgehog 11y ago
  Which are essentially consumer electronics in 2016.
- draw_down 11y ago
  Yeah, that's what I said.
meric 11y ago
They are into cars, too.
forgetsusername 11y ago
>It still seems to me like they think they're a consumer electronics company It's their bread and butter, obviously. But as the article makes clear, there is a specific type of problem associated with having as much money as Apple does, and it becomes a business in itself trying to manage those finances. Eventually, if it hasn't already, that management becomes the business, whether Jony Ive wants it to be or not.
- draw_down 11y ago
  Still, an executive can only do so much in a day and I imagine their time is used up on the electronics they make. The argument here is that they were literally thinking and acting as a bank in response to the FBI's actions.

l33tbro 11y ago

I just don't see it. Haven't we learnt over the last few years that consumers just don't seem to give a shit about their data? Conversely, even Apple not handing over keys to the FBI still doesn't put privacy-concerned folks like us at ease about an Apple Pay service (my peers and I, at least). I actually kind of see it as being of no importance which way the coin falls here on what's been triggered by the San Bernardino case. The security oblivious will remain oblivious regardless of the outcome (identity politics and the Kardashians are far more compelling than encryption). Equally, the skeptical amongst us will remain skeptical - even if Cook holds onto the Iphone encryption we'll always be suspicious of backroom deals or potential backdoors. Whatever the fallout, neither scenario infringes on the legitimacy of Apple as a financial institution - should that even be their play.

artimaeis 11y ago
I'm curious what your privacy concerns are regarding Apple Pay. Tokenized authentication seems notably more secure than any of the traditional card-based offerings. The seller only gets what you permit them to have, which in most cases is simply the token for the transaction to hit whatever card or bank account you have tied to it. The only reason merchants can ask for more, as far as I'm aware, is for shipping related purposes. If there's more to it though I'm certainly curious to know!
coldtea 11y ago
>I just don't see it. Haven't we learnt over the last few years that consumers just don't seem to give a shit about their data? No, when it comes to their banking accounts and e-wallets, we haven't.
- howeyc 11y ago
  Every user of Mint is evidence to the contrary, no matter what their lips say.
  - coldtea 11y ago
    Given access to your financial info to a third party is not the same as being OK with said party being insecure.

peyton 11y ago

It seems more likely Apple wants leverage over banks to cut exclusive deals in order to sell more devices. The retail banking industry suffers from low consumer satisfaction, as it earns the bulk of its profits via fees, personal loans, and mortgages. Apple historically wants no part of that. Competing on margin by mitigating fraud doesn't make sense.

gopher2 11y ago

Not just Apple Pay or being a bank, also about health data and about being trusted in other markets than United States. Good article, though.

crdoconnor 11y ago

This doesn't add up. The biggest asset that the US TBTF banks have right now is their tight relationship with the federal government. Apple could certainly start competing on their home turf with respect to payments and checking accounts, but there's very little profit in that.

girkyturkey 11y ago

I completely understand why Apple is not backing down on this. Even if this backdoor is for one phone, the possibility of having that backdoor stolen is too great a risk to produce. When looking at the big picture, Apple is looking at the side effects this backdoor could produce and doesn't want to take the risk. I can hardly blame them either!

lazylester 11y ago
seems to me the risk of having the backdoor stolen is an overstated vulnerability. Isn't it the same risk as having the iphone source code stolen? Hasn't happened yet has it? If the source code were stolen, someone else could engineer a backdoor. I don't think the overall security risk increases by the existence of a backdoor on a single phone. Amiwrong? That said, I'm happy that Apple is pushing back, but let's be clear about the technical facts.
- fucking_tragedy 11y ago
  To be clear about the technical facts: good luck pushing that engineered backdoor to an iPhone without Apple's keys. Having your source code stolen gives your competitors an edge by letting them know, for free, how you've implemented things that might have cost you millions/billions to research and produce. The biggest threat to having source code stolen is exposing the potentially embarrassing paperclips, string and gum holding a product together. > Hasn't happened yet has it? Years ago and at the time the most profitable software company, Microsoft had its flagship products, the NT kernel and Windows 2000, source code leak. It isn't unheard of. > I don't think the overall security risk increases by the existence of a backdoor on a single phone. If the precedent is set for this single phone, then the security of other phones is at stake. This is also a red herring. It is not about this singular phone. edit: You do not need the source code to find a backdoor or vulnerability[0] [0] every closed-source product that's ever been exploited

dood 11y ago

Putting on cyberpunk goggles, you could take the idea a step further and speculate that Apple is preparing to become a transnational entity, and doesn't want pesky nation-states dragging it down. They already have revenue around the GDP of Hong Kong or Israel.

snowwrestler 11y ago
The cyberpunk were wrong; the Internet has made nations stronger than ever. The NSA hacks Google and Apple, not the other way around.
- aplummer 11y ago
  Don't you get it, that's what they want you to think.
hawleyal 11y ago
That already happened.

pksadiq 11y ago

Hm... An article with no concrete proof. Then, here is my story about Apple vs FBI (sceptical too). FBI (really, NSA) knows of only one phone (company) that is easily crackable, and its IPhone. So Why a sue? This has to be taken utmost care. When FBI sues against Apple, and they say they can't crack (some say, hack), people think that its true, and they trust more in Iphone. Result: More sales for Iphone. FBI (NSA) has more phones crackable. Benefit is for both. So Why Android is less crackable? Answer: It's not. But a user can easily replace it OS with something safe (like, another android like replcant OS). So, FBI (NSA) shall have to try harder to break into. So why not windows phone? Hm... You should not store any obsolete data in your mind. Thank you.

RubyPinch 11y ago
except the FBI changed course, not only saying that the iphone was hackable, but that it was hackable by groups other than the government, which, if someone valued their privacy, they would probably find that statement concerning

baldajan 11y ago

I actually think this article is a bit narrow minded. Apple wants the phone to be your central hub (and has succeeded). You can't live without your phone. You use it for a medical study, for private messaging, for intimate photos, etc. making it compromised and easy to crack would bring halt to that thinking and make the phone's utility moot. It's not about Apple wanting to become a bank, for the same reason they aren't a carrier.

neikos 11y ago
I am unable to imagine that. For me, my phone is an annoyance. It interrupts me, the only thing it has that is useful for me is mobile internet (that I use rarely), emergencies, and music. How can one get so dependent on a piece of technology you ultimately do not really own?
- donkeyd 11y ago
  > a piece of technology you ultimately do not really own You can just buy a phone in cash, then you own it. Not owning your phone is a choice. Even if you're on a contract (at least here in the Netherlands), the phone is often legally yours, you're just paying it off.
  - pdkl95 11y ago
    If Apple (or anybody else) controls root access to the phone or if they can force software updates onto the phone, then you don't actually own the phone.
    - sean-duffy 11y ago
      I'm not sure that logic really holds, what part of the definition of ownership specifies this? If you drive your car without insurance it can be forcibly taken from you, does that mean nobody truly owns their car?
      - pdkl95 11y ago

snowwrestler 11y ago

This makes no sense. In order to act like a bank, Apple would have to track every financial transaction centrally in order to provide for auditing and reconciliation. There are already plenty of laws that give law enforcement the power to subpoena that info. Strong device security is no impediment at all if Apple is a bank.

empath75 11y ago
Not if they put crypto currency wallets in there.

pdkl95 11y ago

Susan Landau, during[1] the House Judiciary Committee hearing: Smart phones are increasingly wallets, and they give us access to all sorts of accounts [...]. NSA will tell you that stealing login credentials is the most effective way into a system. [...] Here's where smart phones are extremely important: they are poised to become authenticators to a wide variety of services. While I think that Apple has good reasons to fight the FBI's order for simple constitutional reasons, they obviously are not limited to a single motive. This comment about phones being "wallets" does fit with the idea of Apple being some sort of bank (or payment processor). [1] https://www.youtube.com/watch?v=g1GgnbN9oNw#t=12977 https://www.youtube.com/watch?v=g1GgnbN9oNw#t=12977

krrrh 11y ago
Wallets is too limited though. Increasingly a phone is not only a wallet replacement, but also a replacement for filing cabinets, bookshelves, photo albums… to the point where having unfettered access to a smartphone is akin to having access to someone's living room and office.
- pdkl95 11y ago
  > photo albums Dr. Landau mentions this kind of use just prior to my t=12977 link to the hearing. I'm specifically quoting the part that seemed relevant to Stross's banking theory.

crusso 11y ago

If the FBI get what they want, then the back door will be installed and the next-generation payments infrastructure will be just as prone to fraud as the last-generation card infrastructure, with its card skimmers and identity theft. How Stross made the leap from a special version of the OS that the FBI could use to eventually crack a password to the easy clone-on-use nature of a card skimmer is completely farcical and looks like something that the mainstream non-tech press would come up with. Just as prone to fraud? I don't understand the need for that kind of hyperbole in an article that looks like it was intended to be taken seriously.

merpnderp 11y ago
Look I dislike that kind of hyperbole also. But I think there is a clearly defined middle step. If the FBI can force Apple to create a new OS. They can force them to install backdoors in every new OS. Then the phones become "...just as prone to fraud as the last-generation card infrastructure." And given Juniper systems was likely a government placed backdoor, there is ample evidence this is true.
xigency 11y ago
Probably more related to the concerns that a judge would compel Apple to turn over their source code and signing key to software, which basically gives the government and any agent with access unlimited authority to tamper with Apple software and devices. Cracking passwords is also bad.

ikeboy 11y ago

>The FBI thought they were asking for a way to unlock a mobile phone, because the FBI is myopically focussed on past criminal investigations, not the future of the technology industry, and the FBI did not understand that they were actually asking for a way to tracelessly unlock and mess with every ATM and credit card on the planet circa 2030 (if not via Apple, then via the other phone OSs, once the festering security fleapit that is Android wakes up and smells the money). Except the phone they were asking is a 5C, which doesn't support Apple Pay because it doesn't have a secure enclave or fingerprint reader. Risk management: call me back when they figure it out. http://www.nytimes.com/2015/03/17/business/banks-find-fraud-abounds-in-apple-pay.html http://www.nytimes.com/2015/03/17/business/banks-find-fraud-...

ubernostrum 11y ago
Risk management: call me back when they figure it out Quoting article you linked: "the banks may largely have themselves to blame." Apple Pay appears to be a secure system, and was designed by engineers to be such. The process of getting a credit card loaded into Apple Pay appears to be a woefully insecure system, and was designed by banks to meet the bare minimum of regulatory compliance and no more. Some banks actually perform some due diligence; one of my cards, when I added it on my phone, required some verification steps to prove to the issuing bank that I was indeed the cardholder I was claiming to be. But another simply loaded onto the phone instantly with no verification. It doesn't take me long to figure out how that leads to fraud.
- ikeboy 11y ago
  >Because Apple wanted its system to have the simplicity for which it has become famous and wanted to make the sign-up process “frictionless,” the company required little beyond basic credit card information about a user. >Some bank executives acknowledged that they were were so scared of Apple that they didn’t speak up. The banks didn’t press the company for fear that they would not be included among the initial issuers on Apple Pay. Sounds like there was pressure from Apple. Regardless, there's absolutely no sign of the security claimed by OP. You'd at least expect parity security, not an order of magnitude more.

martin_drapeau 11y ago

Apple Pay sits on top of the credit card industry. Do you believe they will remove that layer one day, and tie directly to your bank account? As I understand the payment industry is incestuous and has become a commodity. Its ripe for anyone to replace it. Apple seems to be in a good position to do that over time.

snowwrestler 11y ago
I don't know why they would bother. Apple Pay as architected now outsources all the pains in the butt to the existing payment processors: getting terminals into stores, dealing with chargebacks and fraud, and providing regulatory compliance. Apple gets to deal only with with their existing customer base, take a tiny tax for authenticating transactions, and enhance the value perception of the iPhone and Watch, which is where they actually make their money.
- martin_drapeau 11y ago
  Credit Cards, issuers, acquirers, gateways, etc - the whole payment intermediary grabs around 3%. Most of that could all go to Apple one day. Why leave it on the table?
jagermo 11y ago
I think Rogers in Canada has already done that, haven't they? It might be hard, but it is not impossible to get a banking licence, if you have the money for it.
- martin_drapeau 11y ago
  Apple doesn't have to become a bank. There is a lot of money to be made sitting between the bank and the customer (2%~5% of a transaction). Today, VISA and Mastercard grab most of that. Apple could replace them. In a few years, there will be more Apple devices with Apple Pay than issued VISAs. When Apple Pay is accepted everywhere, credit cards will be doomed.

mattiemass 11y ago

I think the premise of following money is interesting, but the conclusion I completely disagree with. I believe Apple's focus on privacy is a direct challenge to Google's business model. Apple makes all their money from mobile device sales, don't they?

petra 11y ago
But maybe the growth in the phone business is limited - so they look for various services like music/tv, and banking could be one such service.

ansy 11y ago

The FBI already has incredible insight into banking transactions. This would not be an extraordinary power for them. The reason Apple is being defensive is because of Edward Snowden. Apple supplies smart phones to the WORLD. Putting on a strong front to the FBI is a PR boon for selling smart phones abroad. They don't want the rest of the world to make a trusted Android fork because they can't trust Google and Apple. They want them to trust and buy Apple products! Unlocking that smart phone would cost Apple billions in foreign purchase orders.

nxzero 11y ago
Curious, what do you make of China's demands on Apple related to the "security" of iOS and the iPhone? Why do you believe this hasn't cost Apple billions in foreign purchases?
mangeletti 11y ago
> The FBI already has incredible insight into banking transactions. This would not be an extraordinary power for them. So, since the FBI has that insight now, it's inconsequential for them to have it in the future? Where did you come up with this logic?
SkyMarshal 11y ago
>Apple supplies smart phones to the WORLD. This has been my assumption from the start of this case too. Apple can't afford to lose China, if only for the purpose of avoiding negative quarterly growth reports. Becoming known by the Chinese to be hackable by the FBI, wouldn't go over well there.
- x0x0 11y ago
  Not to mention the (obvious, ugly) next step: every country in the world demands the exact same privileges the fbi get. And why shouldn't they? This may not be avoidable. Even blackberry had to do this ([1], dozens more). But if anyone has strong enough market power to push governments towards privacy, it's apple. [1] http://www.theguardian.com/technology/2010/aug/10/blackberry-saudi-arabia-ban-lifted http://www.theguardian.com/technology/2010/aug/10/blackberry...

blinkingled 11y ago

It's too far fetched esp given a very simple incentive exists for Apple to be pro-privacy - market differentiation. Given Tim Cook's background he may also truly believe in privacy for the masses but that's a byproduct. Apple knows that with all their competitors slowly but steadily stepping up their game and offering solid smartphones for 1/3rd of the iPhone's price and little practically left to do for Apple to stand out in non-USA markets, privacy is their one big appeal. That plus lower priced iPhones and Apple's brand value practically guarantee that Apple will stay ahead - take out one leg and it starts to look shaky. I think they'll continue to emphasize it to sell iPhones until they find another market that's as lucrative as the iPhone is.

fweespee_ch 11y ago

As much as I like Antipope, I think he is overestimating the long term thinking of the Apple business because the time to have started the "Apple Bank" process is 2014 because they should have just acquired Simple: http://techcrunch.com/2014/02/20/simple-acquired-for-117m-will-continue-to-operate-separately-under-its-own-brand/ http://techcrunch.com/2014/02/20/simple-acquired-for-117m-wi... Then moved on from there and making it into "Simple, The Apple Bank". The fact they didn't move in that direction makes me think it never really occurred to them.

martin_drapeau 11y ago

I don't think Apple will become a bank. They could however replace VISA and Mastercard in the long term, and grab the 2% to 5% of payment fee over each transaction. Vertical integration to its best. To get there, merchants need to support Apple Pay, and Apple needs to continue selling phones. In the near future, there will be more Apple Pay enabled devices in circulation than VISAs and Mastercards. When the scale tips, credit cards will be doomed.

TheLogothete 11y ago
Don't you need credit cards to use apple pay?
- dyladan 11y ago
  Sure, now. In 5 years who knows? I could definitely see AAPL partnering with visa/mastercard/amex or even directly with banks for direct account access on a program that doesn't require a physical card. Plastic cards will become the new cash (right now cash-only businesses are a little behind the times but they still exist) and phone payments will become the new plastic.
  - TheLogothete 11y ago
    Partnering? Sure! I think this will be the way forward, but the GP says Apple is out to get VISA and MC (as companies) and will leapfrog them with one clean swoop. This will most definitely not happen.
- The_Magistrate 11y ago
  Currently, yes. The article is positing that once Apple has the infrastructure in place for end-to-end transactions, removing the VISA/MC puzzle piece will be easy. Ultimately, you'd put money into an Apple account and spent it on your iPhone.
  - TheLogothete 11y ago
    I don't think you are very familiar with how the payments industry works. Credit cards offer much more than a means to pay. Apple will need to double their headcount to compete with Visa. Or do you think that this is a feasible scenario?

YeGoblynQueenne 11y ago

>> Their phones are, in many respects, more secure than the ATMs and credit card infrastructure we've used to accessing our bank accounts. Well, except that the ATM doesn't permanently store your credentials, potentially[1] making them available to anyone who takes possession of it. Not to mention: it's possible, though not easy, to take possession of a whole ATM. However, the people who have done so were after the bank's money, not your money. Whereas if someone steals your device they're potentially[1] getting hold of your money. _____________________ [1] Read: it's only a matter of time.

nsedlet 11y ago

The logic in this article seems confused to me. The central business problem for retail banks is how to earn more from deposits than they pay in interest, and to do so at a scale of billions of dollars. Apple also needs to figure out how to make money from its pile of cash. Accepting deposits and becoming a bank would only make that problem worse - so how is "having lots of cash" evidence that Apple wants to be a bank? An investment bank is a different animal and I would strongly disagree with the author that Apple is a "de facto investment bank". Investment banks advise clients on financial transactions and help clients hedge risk (something Apple doesn't do). There are much more straightforward and compelling explanations for why Apple cares about security (as others in this thread have pointed out). The only thing I would slightly agree with is that Apple maybe has an eye toward building its own payments network (a payments network is NOT a bank, by the way). But Apple isn't even CLOSE to competing with Visa and MasterCard in that regard - even if it did disintermediate the credit card companies it would have to have much much larger consumer adoption of Apple Pay plus a merchant network. Honestly the tone and muddled structure of this article come off as a poorly substantiated conspiracy theory.

TheLogothete 11y ago
Why is this article even on the front page (#1 even) of HN? Is this guy famous? His article is pure ramblings and defies common sense.
- DanBC 11y ago
  Charles Stross is an author, and has written some (really good) SF that covers some stuff in a way that HN appreciates. He's also a member here, and sometimes comments. http://www.amazon.co.uk/Charles-Stross/e/B001H6IW0Q/ref=sr_tc_2_0?qid=1459176293&sr=8-2-ent http://www.amazon.co.uk/Charles-Stross/e/B001H6IW0Q/ref=sr_t... http://www.amazon.com/Charles-Stross/e/B001H6IW0Q/ref=sr_tc_2_0?qid=1459176293&sr=8-2-ent http://www.amazon.com/Charles-Stross/e/B001H6IW0Q/ref=sr_tc_...
  - dredmorbius 11y ago
    He submitted this item himself. Sneaky bastard.

oldmanjay 11y ago

What is the purpose in speculating the one true reason that Apple is doing this? They're a massive company with many needs and desires, so there are probably many interlocking factors here. Chasing the simple narrative is a very human game, but it's not really purposeful, it's just play.

rvooda 11y ago

There are many theories in this post, but no facts. As the comments depict, becoming a bank will only make things harder and if someone trying to get profits out of a product or a service is wrong, then everything in this world is wrong. You are talking about legacy software used by banks. Are you trying to say that we should not advance in financial systems? Or are you saying that they are superficially unbreakable?

neotek 11y ago
I think the author is saying neither of those things, but that bank software is pretty much uniformly rooted in the stone age, updates come at a glacial pace, and Apple could use its significant software engineering prowess to build something substantially better. He gives the example of Apple being in a better position to detect fraud, for instance, by virtue of the fact that Apple knows where your phone / watch is, and by extension where you are, compared to a credit card company that only knows where your card has been used.

julie1 11y ago

The elephant in the room is we are building a new religion based on technology. FBI & Apple are both stupid. Computers always ends up to be used in a real physical world. This is called the analogic hole. This has since decades enable to weaken crypto with side channels (temperature of CPU, times of computation, EM radiation, noise of the keys...). And how useful is it to spend billions of dollars to break new technologies when at the end human will still interact with computers with analog means? Microphones, cameras are still working. And it covers 30% of the surface of what a secret service requires to be able to know. And cold war has left government with more than enough cheap efficient technologies. Being smart and foxy covers 15%. 5% is PURE LUCK. Science is about aligning the cost of detection with its efficiency. Crypto is efficiently made so that breaking algorithms is more and more costly. Detection by measure/math is always failing at one point. (false positive/negative) And what about the remaining 50% ? It is HUMINT. When people love the place where they live and trust their government they are more likely to snitch the criminals. To help keep the social peace. Yes, social concord is what protect a nation. People feeling united and trusting their own governments. I think that electronic intelligence is counterproductive. I also believe we would live in a better world if laws and moral where in sync with who we really are. If we did not required secrecy to be who we are because governments made illegal stuff that are not crime, except in the eyes of a minority. Education could help too; people when fearful are behaving like dangerous trapped animals. Education purpose is not about making citizens obedient or fearful, it is about making them able to become political leaders themselves. Every citizens should be trained in the optic they will be a member of the parliament. The next Benjamin Franklin, Roosevelt, JFK, Lincoln ... USA has beaten the former colonial power with education. Scientific education. It could be time USA become a great nation again.

Jerry2 11y ago

>Early iterations of the iPhone notoriously lied about the security of SSL connections to email servers; my understanding is that this led to them being banned from some corporate and government accounts for a few years. What? Never heard about this. Is he bullshitting about this or is there some validity behind this claim?

bendbro 11y ago
I found a number of articles referencing this IOS 4.2 SSL vulnerability. http://www.peterbance.co.uk/information-security-articles/ssl-vulnerability-in-apple-ios/ http://www.peterbance.co.uk/information-security-articles/ss... It's somewhat difficult to find the event on Google due to results of the search being masked by the last IOS "goto fail" SSL vulnerability. http://arstechnica.com/security/2015/04/critical-https-bug-may-open-25000-ios-apps-to-eavesdropping-attacks/ http://arstechnica.com/security/2015/04/critical-https-bug-m... While I'd imagine this is open to some interpretation, IOS is the least secure mobile OS, at least in terms of the number of vulnerabilities it has. It is not worth believing it is immume from the same failings of other OSes. http://venturebeat.com/2015/12/31/software-with-the-most-vulnerabilities-in-2015-mac-os-x-ios-and-flash/ http://venturebeat.com/2015/12/31/software-with-the-most-vul...
- Jerry2 11y ago
  None of those links address the claim about SSL and email. And iOS4 is not an "early" iPhone.
  - bendbro 11y ago
    I wanted to come back and say I was too quick to judge on the vulnerability article. This data doesn't indicate whether bugs were found and patched internally, or were actually exposed first by malware.

ibn-alfatal 11y ago

Around 2030 there will likely be a quantum computer running Shor's algorithm efficiently.

matt_wulfeck 11y ago

What if what it's really about is that Tim Cook values privacy more than his predecessor and thinks it's important that his products reflect that value? Given his position and the overreaching request by the FBI, I think most of us privacy-conscious HNers would behave the same.

tryitnow 11y ago

This makes sense to me at a high level. A bit too wordy for my tastes but yes, if I were Apple I'd want to be super secure in part because I want to be big player in the payments arena. Although it makes it's not particularly revealing. Yes, companies want more control over security because that allows them to pursue business opportunities. No need to even follow the money here, it's just common sense.

pfarnsworth 11y ago

No. The reason why Apple cares is because if everyone knew the US government could snoop on their messages and iPhone information at will, no one around the world would buy iPhones or Apple products again, due to the halo factor. It would be instant death. So Apple needs to tell the world that their information is secure from every government. Otherwise they will be out of business.

mercurial 11y ago
I fail to see the pitchfork-wielding crowd making its way to to the parliament of all western countries engaged in large-scale snooping (that is, most or all of them). Probably because people don't give a damn about the government reading their mail ("I have nothing to hide"/"Google is already reading it anyway").

Tloewald 11y ago

There's a certain group of people who seem determined to see some Machiavellian motives behind Apple defending the security of its (and everybody's) encryption. It's not just about making money. It's not just a marketing pitch. It's not just because it's technically stupid to do what the FBI wants. It's not purely driven by Apple's concern for its customers. It's all of those things at once. Everyone in the industry thinks the FBI is being boneheaded. The current and former heads of the NSA think the FBI is being boneheaded. Google, Microsoft, and Amazon. You don't need to look behind the obvious motives for something underhanded. It's. freaking. obvious.

jswny 11y ago

Apple has an obligation as a financial institution to win this case. Apple is a business, and it has customers who won't want to buy phones which they know are purposefully compromised from a security standpoint. In addition, those customers don't want to buy phones for which the US government has unlimited access to. Apple has a financial interest to keep their devices as secure as possible and act in the interests of their customers, the ones who drive their business.

known 11y ago

1. Regulate market capitalization 2. Tax corporate revenues

jimminy 11y ago

Apple is already operating a private hedge fund to deal with their excess capital. https://en.m.wikipedia.org/wiki/Braeburn_Capital https://en.m.wikipedia.org/wiki/Braeburn_Capital

stretchwithme 11y ago

I think Apple's motivation to maintain security a lot simpler. Apple had to demonstrate to the Chinese government that its devices were secure and could not be used to spy on Chinese users. If Apple gives up on that, they'll lose those sales.

dm_mongodb 11y ago

this in no way effects whether one is trusted for payments.

Steko 11y ago

> unlike the banks and the credit card settlement network they're not running on incrementally upgraded legacy infrastructure designed in the 1950s Good point, Apple's incrementally upgraded legacy infrastructure was designed in the 1990s.