The fight between Apple and the FBI over the security protections on the San Bernardino, Calif., iPhone is about more than a single iPhone or Apple’s product line. This is a reality check for the entire tech industry, which has largely remained unchecked.
The concept of connected commerce has emerged only in recent years and, as a result, regulation and legal precedent has largely failed to keep pace with these sweeping consumer shifts.
In the U.S. where this battle is unfolding, 78% of households have a smartphone as of 2016, according to new research from Euromonitor International. That’s up 31% from five years ago. Half of all consumer payments made today to a business transact over the card payment networks, up from 40% five years ago. The US, and for the matter the entire globe, is more connected than ever before. Increasingly purchases are shifting from physical cards to digital devices, meaning even more can be tracked. Based on new data from Euromonitor International, US$653.7 billion was transacted on a digital device in 2015. That equates to roughly 7.2% of all consumer payments in 2015 with that percentage expected to rise to 16% by 2020.
These new digital connections have ushered in new payments, increased speed and enhanced convenience previously unknown to consumers. Consumers in this digital era can more easily browse for goods and services wherever they may be. Of course, such advancement does not come without unintended consequences. In particular, this connectivity has put the spotlight on the role of privacy and security in this new digital age. As this mobile-first world takes shape, privacy and security continue to be frequently cited as potential impediments to the adoption of digital commerce.
Consumers in Euromonitor International’s Hyperconnectivity Survey reported turning to personal computers over mobile device due to concerns with transmitting financial information through mobile devices. Data theft also remains a legitimate fear for many consumers when it comes to commerce and as such is a significant barrier to mobile shopping. When asked why they do not make purchases via smartphones, half of consumers in this same survey cited privacy concerns, which came in behind only the small screen size as the most significant barrier to adoption.
Even the reason that consumers give for not having interacted with brands on social media is rooted in privacy. For example, consumers are most likely to shun brand interaction because they prefer not to engage in a public setting. Moreover, 26% of global consumers worry about companies having access to their social media circle and another 21% do not want their purchase habits publicized to their social circle, according to Euromonitor International’s Hyperconnectivity Survey.
Much of this remains unchartered territory with little regulation and legal precedent that speaks to the realities of this mobile-first world. At the center of the Apple-FBI fight is the iPhone used by the terrorist in last year’s San Bernardino, Calif., rampage. In February, a federal judge granted a request by the FBI to force Apple to disable the auto-erase function, which is enabled when too many erroneous lock screen passcodes are entered in the phone.
The FBI is hopeful that the phone’s contents will reveal more about the terrorists’ activities leading up to the attack. While Apple has been assisting with the investigation, the Cupertino, Calif.-based tech titan says the US government’s request goes too far and would essentially create a backdoor or master key to unlock millions of other iPhones.
The crux of this case is about the need to protect an individual’s privacy versus the risk to national security. Apple and other technology companies argue that such encryption, which refers to the scrambling of data so that it can read only by someone with authorized access, is necessary to protect the individual’s private and personal information. Law enforcement agencies, on the other hand, argue that technology like encryption hinders their ability to intercept and thwart criminal and terrorist activity. Tech companies counter that it's impossible to let government agencies break encryption without letting criminals do the same. The central question in this case is simple: Does the government have the authority to force Apple to help unlock the phone based on statute?
One way to avoid a long drawn out court battle would be for Congress to get involved. While federal wiretapping laws require traditional phone carriers to make their data accessible to law enforcement agencies, this does not apply to companies like Apple and Google nor do these companies want the increased oversight. In fact, security is a central part of Apple’s global marketing strategy as evidence by the Apple Pay launch announcement in September 2014, in which Apple focused on the platform’s tokenization and biometric security as major selling features. This value proposition resonates with a user base that is becoming increasingly concerned with what it means to live, work and conduct commerce in this new digital era.
Unless Congress becomes involved, this may turn into an arms race between the U.S. government and one of the world’s most valuable companies to determine whether there is precedent in such a case. Regardless of how this debate is resolved, it will serve as a reminder to consumers that the increased convenience brought forth by this mobile-first era means that all actions unfolding on a device, including commerce, may be tracked by digital marketers, corporate strategists and even the government itself.
The PR battle surrounding this case will likely make many consumers question their digital actions, especially those in subsets of the population such as Baby Boomers, which are more cautious about their digital activity in general. Regardless of the resolution, the publicity of this battle will likely not be favorable to Apple or other technology companies that face an uphill battle when it comes to convincing users that the advancements outweigh the trade-offs that come conducting commerce in this digital era.
Michelle Evans has served as an analyst covering mobile payments at Euromonitor International since 2010.