Why Apple's app payment breach matters

17 Jul 2012

The web is awash with coverage of a Russian hacker’s apparent breach of Apple’s tight security surrounding app, and in-app, payments.

News of the alleged breach surfaced Friday and prompted a swift response from Apple, namely blocking access to the IP address of a file opening access to free in-app purchases, and requesting YouTube remove a video posted by the reported hacker, according to The Inquirer. The news site also reports that payment handler PayPal is blocking attempts to fund the hacker site.

We all know what happened to Visa, Mastercard and PayPal when they blocked payments to Wikileaks late 2010, so one ramification is that PayPal should be braced for retaliation.

In the Apple hack, there is also the developers to consider. In-app payments have quickly become the de facto method of monetizing free apps, and with the Next Web estimating some 30,000 people have taken advantage of the breach, there could be some serious compensation claims against Apple.

The vendor hasn’t made any statements about repaying out-of-pocket developers, however the Guardian reports even working out which apps are affected would be a monumental task, let alone how many fraudulent downloads were made. The newspaper also touches on the huge ramifications for consumers, noting they may leave themselves susceptible to fraud by revealing their user name and passwords in order to leverage the hack.

While the potential for future fraud is serious enough, this incident could also damage consumer’s confidence in the nascent mobile payment market.

Data management firm Stibo Systems revealed in March that almost 50% of smartphone users hold off on in-app purchases due to a lack of information, or inconsistencies in those details (it polled 2,000 smartphone users). Imagine what a problem like Apple’s will do to that confidence.

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