WASHINGTON The original iPhone revolutionized consumer technology and breathed life into the market for mobile payments but the newest iPhone's most futuristic feature may signal a growing problem for banks and card networks.
"Banks currently have the trust of the consumer, but Apple is building that as well," says Don Thibeau, chairman at Open Identity Exchange and OpenID Foundation. "Apple has my phone number, and my passwords and they have monetized that attribute through iTunes."
The fingerprint reader built into the iPhone 5s raises the stakes in a way that should concern the banks and card networks, he says.
"Why would Apple develop fingerprint biometrics on an iPhone?" Thibeau asks. "They want to elevate trust on their closed system."
Such moves by Apple are "increasingly independent of financial institutions," he adds. The fingerprint reader on the iPhone 5s isn't accessible to banks or other app developers.
Digital identities come in various forms, from e-mail addresses to social network passwords and biometrics and even through behavioral patterns. Visa's goal in addressing digital identity has been to develop a system that would benefit its issuing and acquiring banks, says Mark Nelsen, Visa's head of global risk and authentication products.
"Banks are aware of what other companies are doing [to make money off consumer identities]," Nelsen says. "The card schemes are providing banks with more data that can benefit them [to provide more services]."
Nelsen, Thibeau and others discussed these issues as part of Visa's Oct. 2 Global Security Summit.
Consumers may not fully understand how companies are bartering for more information about their customers, Thibeau says. "The flashlight app on your iPhone is a good example," because even though it is provided for free it still requires consumers to register the phone and set up an iTunes account, he says. "You get the app if you provide Apple the contacts and other info on your phone."
Molly Crawford, policy director of Future of Privacy Forum, agrees the flashlight application is an example of the major issue of placing a value on digital identifiers.
"Consumers like something done for them, not to them," which makes free applications appealing, Crawford says.
Despite the threats from technology companies, consumers still place trust in financial institutions and card networks.
"Convenience is a top priority for customers, but security is assumed," says Donna Turner, senior vice president of policy and control for Bank of America. At a bank, "they expect everything to be safe," she says.
Competitors in the financial services and payments industries consistently talk to each other about security, but sharing detailed information is challenging, Turner says.
"Data at flight is data at risk, and it calls for accountability, responsibility and liability to keep it safe," Turner says.
Banks realize there is brand risk and financial risk when developing security technology and potentially sharing it, Turner says.
In the meantime, PayPal, Apple and Facebook are building closed ecosystems with the goal of providing transactions and other payment services without banks, Thibeau warns.
Consumers give social networks a lot of "powerful information," he adds. Those networks plan to expand upon that information to generate revenue, Thibeau says.