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Comment by johnloeber | Hacker News Reader

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.)

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Yes, I'm sceptical too.

I think the article is mixing up banking with payment processing (payment processing is an important but small part of retail and wholesale banking).

Retail banks make most of their money by charging for loans - either individual overdrafts, personal loans or coporate loans. For apple to be a profitable bank they would have to start assessing businesses and individuals for creditworthiness. It seems quite far from their current business model and not obvious why they would want all the regulatory oversight that comes with it.

>I think the article is mixing up banking with payment processing (payment processing is an important but small part of retail and wholesale banking).

Well, if not a bank something like VISA.

They're better capitalized than most banks and have nearly the entire infrastructure set up for end to end payments processing, I'm proposing acquiring Square to complete their processing arm. So why not be a bank AND a payments processor? They can run the bank as a separate entity and not have the regulatory scrutiny come down on the whole company.

>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.

They wont.

But that's about Apple Pay transactions, which are logged into their central servers anyway, and will be given to the government when asked, as all banks do.

This is not about data on Apple Pay transactions, but about Apple Pay's security itself.

You wouldn't use an easily compromisable phone as your be-all-end-all wallet, the same way you wouldn't use an insecure banking portal.

Apple Pay transactions are not logged on Apple's "central servers". Apple has absolutely zero insight into what you buy with Apple Pay. The tokenization protocol is run by the card networks, not Apple.

Well, that's orthogonal to the argument.

Wherever they are logged, they will be available to the government -- Apple doesn't care about those data, but about the security of Apple Pay.

* for now

Banking systems don't need impenetrable security for people to use them. People pay online and use online banking every day from easily compromisable laptops. They do so because banks and credit card companies have good fraud coverage (unless you're negligent).

I think the real reason for Apples worry is that they want people to trust the smartphones for way more then just payments, for instance Health information. And people might just end up much more reluctant to do so if they know the phones are easily hackable.

> Banking systems don't need impenetrable security for people to use them. People pay online and use online banking every day from easily compromisable laptops. They do so because banks and credit card companies have good fraud coverage (unless you're negligent).

Author's claim was that they defend security of their platform to outcompete other payment processors on fraud insurance costs.

If the article's point is just that Apple wants to maintain customer trust in the security of the iPhone, well, Tim Cook has stated exactly that numerous times. I don't understand why it took a whole post full of ill-considered speculation about banking to echo that sentiment.

>If the article's point is just that Apple wants to maintain customer trust in the security of the iPhone, well, Tim Cook has stated exactly that numerous times. I don't understand why it took a whole post full of ill-considered speculation about banking to echo that sentiment.

Obviously because the whole point of the article is not to merely echo the sentiment, but to attempt a guess at the reasons behind it.

Do we really need a secret Apple bank plan for this to make sense? Heck, millions of people already bank on their iPhone, using apps.

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.

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.

He also mentions the phone as a tool for payment:

> I'm going to assume you know what Apple Pay is: you use your iPhone, iPad, or Watch as a trusted, authenticated identity token in a shop to pay for stuff. It ties into your bank account and basically your phone swallows your debit and credit card.

I thought that was fairly explicit. If the phone (or watch...) is going to be the primary tool of payment than its security is paramount. Apple wants at least the same level of protection against tampering as the chip inside a modern credit card.

Note that there is already a bank called Apple Bank [0] and a software product called iBank [1]. So what are they going to name their hypothetical Apple-computer-financial-institution?

[0] https://www.applebank.com/ [1] http://www.ibank.com/

There was a Cisco IPhone[1] before there was an Apple iPhone, Apple somehow made it work[2]. Apple Computers had also signed an agreement[3] with (the Beatles') Apple Corp in the 80's not to enter the music business, but they did[4] and also made it work[5] after breaching the agreement. Having piles of money can solve a lot of disagreements

1. https://en.wikipedia.org/wiki/Linksys_iPhone

2. http://www.networkworld.com/article/2295551/network-security...

3. https://en.wikipedia.org/wiki/Apple_Corps_v_Apple_Computer#1...

4. https://en.wikipedia.org/wiki/Apple_Corps_v_Apple_Computer#2...

5. https://en.wikipedia.org/wiki/Apple_Corps_v_Apple_Computer#2...

Well, they could just buy applebank and ibank. There's quite a bit you can do with $0.1 trillion dollars.

I am pretty sure Apple has enough pocket change to buy both of them with their morning coffee.

They could just tell them to change their names, "It's not that big a deal."

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.

>As far as I know, this makes it rather simple to trace the flow of money, at least domestically.

Only for the FBI/law enforcement though. A backdoor has no such restrictions, making a backdoored iPhone vulnerable to attacks by black hats.

Pity Apple don't have a widespread network of retail storefront locations....

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