Miscellaneous 4 min. read

Is Apple Hurting Itself with Its Data Privacy Views?

Is Apple Hurting Itself with Its Data Privacy Views?

Hotspot Shield Blog_Apple Data Privacy Views

Apple CEO Tim Cook presents a rather straightforward approach to Apple Pay, the company’s new payment system. Instead of viewing consumers as the company’s moneymakers, he focuses on the product itself. Like most payment systems, Apple Pay generates a small profit from each transaction. Unlike most payment systems, however, the system doesn’t generate funds by using or selling data gathered from the consumers who use the product. 

 While unusual in the larger technology market, this business model isn’t atypical for Apple. From the iMac to the iPad, Apple has long poured serious resources into the products themselves. Some tech experts wonder whether it’s time for the company to broaden its scope at long last.

Convenience and Security

One thing is certain. Whether critics love or hate the technology, Apple Pay offers one of the most secure payment methods on the market. Users can simply download the Apple Pay app on their iPhone, add credit card information, and pass their phone near a payment device in order to complete a transaction. Since a single device holds all of the user’s data, this makes for a streamlined and convenient payment method.

Since Apple stores each user’s data in a secure format directly on the user’s phone instead of storing credit card data in the cloud, this also makes for a secure payment method. Apple Pay links each user’s credit card information with a standalone Device Account Number (DAN), so credit card information never has direct connections to an individual. A stolen DAN wouldn’t be usable since devices aren’t able to authorize transactions using another’s DAN.

Only by stealing an iPhone would one user be able to use another’s Apple Pay account to complete a transaction. With the thumbprint technology built into the iPhone 6, however, the chances of being able to execute such a theft are very slim.

Privacy versus Transparency

Since Apple hasn’t adopted standard marketing methods to monetize consumers’ data, the company highlights the steps that it takes to protect consumers’ data instead. Cook firmly believes that Apple’s clients have a right to privacy and even goes so far as to claim that the company doesn’t track purchases, buying patterns, or personal information. If this sounds unusual, that’s because other issues are at play here, too.

Cook’s statements dance around Apple’s real issue: transparency. Though consumer privacy continues to be a pressing issue, many argue that companies should be able to gather and sell consumers’ data if transparency is at the forefront. As long as companies remain clear about their intentions and prompt consumers to accept their terms and conditions prior to using any applicable products, they maintain transparency. Apple effectively skirts this hot button issue by emphasizing Apple Pay’s efforts to protect privacy.

Retailer Security

Much of the privacy discussion surrounding Apple Pay focuses on consumers, but this issue impacts retailers as well. During the past few years, hackers have leaked personal credit card data from countless small and large retailers. Though the individual consumers feel the effects of this in the short term, retailers ultimately bear the brunt of the financial and public relations cleanup. If retailers’ own systems don’t store any financial data, hacks become impossible, and retailers may benefit the most.

Benefits or Limitations?

The majority of retailers who have adopted Apple Pay rely on Near field communication (NFC) technology. With this tech, the payment system doesn’t have the ability to access or collect retailer data like stock keeping units (SKUs), which identify inventory items. This means that not only does Apple choose not to collect data related to individual purchases, but also the tech is actually unable to do so.

In order to transfer this kind of data to Apple Pay for information gathering purposes, retailers would need to work with the tech company on an individual basis. Given the time and financial resources involved to complete this monumental task, it’s unlikely to take place in the near future. Instead of dwelling on this shortcoming, Apple has spun this lack of information as a benefit.

Of course, the reality of retail is that for decades, consumers have willingly given up their personal data, in exchange for better shopping experiences. Maintaining a layer of privacy around personal data may be important for some consumers, but the vast majority has indicated a willingness to part with their data in exchange for personalized shopping experiences, location-based discounts, and special offers based on their shopping patterns. Unfortunately, Apple Pay can offer none of these benefits.

Loyalty Programs

Many retailers and marketers have put billions of dollars into developing loyalty programs over the past few decades. These programs thrive on data collection because they offer perks and build consumer bases around consumers’ purchase histories. If Apple Pay cannot collect or pass along data from its users, these programs may suffer.

Since loyalty programs can’t integrate with Apple Pay, they will have to require consumers to take an additional step by signing into a retailer’s app before making a purchase. Marketing experts suggest that in order to drive consumers to take this extra step, innovative loyalty programs will have to develop new tactics for being relevant and useful to consumers. Other retailers that rely on loyalty programs and traditional data collection have already boycotted Apple Pay.

Though Apple Pay currently doesn’t offer any type of integration with retailers or loyalty programs, tech experts suggest that third-party apps may be able to mine the data that this payment method obscures. With all of the data logging apps that most consumers already have on their iPhones, it’s only a matter of time until consumers’ data is back in the hands of marketers, whether Apple Pay endorses the methods or not.

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