
Follow the money: Apple vs. the FBI - cstross
http://www.antipope.org/charlie/blog-static/2016/03/follow-the-money-apple-vs-the-.html
======
nsedlet
The logic in this article seems confused to me.

The central business problem for retail banks is how to earn more from
deposits than they pay in interest, and to do so at a scale of billions of
dollars. Apple also needs to figure out how to make money from its pile of
cash. Accepting deposits and becoming a bank would only make that problem
worse - so how is "having lots of cash" evidence that Apple wants to be a
bank?

An investment bank is a different animal and I would strongly disagree with
the author that Apple is a "de facto investment bank". Investment banks advise
clients on financial transactions and help clients hedge risk (something Apple
doesn't do).

There are much more straightforward and compelling explanations for why Apple
cares about security (as others in this thread have pointed out).

The only thing I would slightly agree with is that Apple maybe has an eye
toward building its own payments network (a payments network is NOT a bank, by
the way). But Apple isn't even CLOSE to competing with Visa and MasterCard in
that regard - even if it did disintermediate the credit card companies it
would have to have much much larger consumer adoption of Apple Pay plus a
merchant network.

Honestly the tone and muddled structure of this article come off as a poorly
substantiated conspiracy theory.

~~~
TheLogothete
Why is this article even on the front page (#1 even) of HN? Is this guy
famous? His article is pure ramblings and defies common sense.

~~~
lisper
What difference does it make if the author is famous or not? Famous people get
things just as wrong as non-famous people. (And I have no idea why you think
the article defies common sense. It seems like a perfectly cogent argument to
me.)

~~~
kbenson
I agree that fame should not be a sole qualifying attribute for getting on the
front page here, but I think fame can be a qualifying factor, if used
appropriately. That is, if a person is famous for being prescient in items
relevant to the post, or if they are well known or respected in that sphere,
that can help carry some legitimacy to their views to those that aren't
entirely capable of assessing the merits of the argument, and would rather not
spend time researching claims from someone that turns out to be a rambling
idiot.

There are also pieces by those famous that are less arguments, and more calls
to action, in which the person't fame, or reputation, helps push the message,
and as such it can be factored in as part of the message. It becomes useful
for assessing how widespread the reach of the message will be. E.g. Brad Pitt
speaking our against a social injustice vs Kim Kardashian commenting on fiscal
policy. In one the fame helps spread the message (even if it doesn't, or at
least _shouldn 't_ change the merits of the message itself), in the other the
fame is irrelevant.

For Stross, he's a fairly famous hard Science Fiction author, he's commented
on the future and fiscal issues before, and has written books regarding
interstellar money systems (haven't read yet) and possible problems with them.
His fame in this area makes me want to see what he has to say, we'll see if I
agree after I finish reading it...

~~~
marincounty
The late Christopher Reeve said it perfectecly. It never got any coverage, but
it made me instantly like him more.

Basically he got tired of reporters asking his opinion--on everything. It was
right after Superman. He said in a tired voice, "Why are you asking for my
opinion? Why us actors? Why not the Janitor down the hall. Guess what--that
Janitor probally knows more? We read lines other people wrote?"

The reporter walked away, like Superman didn't save the day?

------
baldajan
I actually think this article is a bit narrow minded. Apple wants the phone to
be your central hub (and has succeeded). You can't live without your phone.
You use it for a medical study, for private messaging, for intimate photos,
etc. making it compromised and easy to crack would bring halt to that thinking
and make the phone's utility moot.

It's not about Apple wanting to become a bank, for the same reason they aren't
a carrier.

~~~
neikos
I am unable to imagine that. For me, my phone is an annoyance. It interrupts
me, the only thing it has that is useful for me is mobile internet (that I use
rarely), emergencies, and music.

How can one get so dependent on a piece of technology you ultimately do not
really own?

~~~
aantix
I get that the Hacker News crowd maybe a bit more anti-social, but how do we
continuously ignore what's going on in the general population (HN == anti-
Facebook, anti-Big Bang Theory, basically, anything that's popular)?

Have you been to a concert? A family reunion? A movie? People waiting in line?
People are looking at their phones constantly, even to the point, where
they're ignoring everything else around them.

Yes, people live in their phones. It's so obvious.

~~~
justinh
The best theory of the formation of the universe is the Big Bang Theory. I
check HN at least daily (often far more), and I haven't seen any posts
regarding alternative theories or poking holes in the Big Bang Theory.

What origin of the universe theory does the HN zeitgeist advocate?

~~~
aantix
LMAO.. Big Bang Theory... The TV Show.

I probably should have been more explicit but the very fact that this was
misunderstood, probably proves my point about HN News and pop culture..

Or maybe you're just trolling... :)

~~~
jaded-rabbit
I'm new to HN and the main thing I notice ( and like) is that people here
don't seem so obsessed with mundane rubbish.

BBT as example - low level comedy with canned laughter that relies on silly
stereotypes for literally everything. Faux-geeks love it - the people who
'know everything about tech and gadgets' but can't read a line of code, the
populist sciencey crowd rather than the science people themselves.

I'm not american so maybe just cultural difference but everything about is
always seemed too try-hard and populist.

If HN spurns those hangeronners then I'm happy. Happy-ish anyway.

~~~
aantix
While the value of watching a "rubbish" comedy (or TV for that matter)
certainly is debatable, the content of the show, or at least the accuracy of
the physics jokes, are spot on. They are pretty rigorous in their joke fact
checking :

[http://www.wsj.com/articles/the-big-bang-theory-has-
hidden-j...](http://www.wsj.com/articles/the-big-bang-theory-has-hidden-jokes-
down-to-a-science-1443808102)

>A lot of the humor is over the heads of the general audience.

>But there are jokes inside of jokes, and for those who

>recognize the science, they’re hilarious. The show takes this

>stuff so seriously that it employs a UCLA physics professor

>to make sure it gets it right.

>Case in point: In a 2009 episode, “The Jiminy Conjecture,”

>Sheldon and Howard heard a chirp and then argued over which

>variety of cricket made the sound.

>On the whiteboard in the background is Dolbear’s law, which

>states the relationship between the air temperature and the

>rate at which crickets chirp.

>“I went to a Dolbear presentation at Tufts, and they talked

>about this, in like 1989,” says one high-profile fan of the

>show, Seamus Blackley, one of the creators of Microsoft’s

>original Xbox game console. “I remembered it!”

>“Once I realized what was going on, it was awesome,” added

>Mr. Blackley, who is also trained in physics. “It’s the No. 1

>show, and it has actual physics in it.”

I'm just not sure there's ever been a show that's attempted to deliver comedy
around Schrodinger's Cat or Quantum Uncertainty. They do a phenomenal job with
comedy surrounding such technical subjects, but just by acknowledging my
fondness for the show, puts me in a minority here.

------
ansy
The FBI already has incredible insight into banking transactions. This would
not be an extraordinary power for them.

The reason Apple is being defensive is because of Edward Snowden. Apple
supplies smart phones to the WORLD. Putting on a strong front to the FBI is a
PR boon for selling smart phones abroad. They don't want the rest of the world
to make a trusted Android fork because they can't trust Google and Apple. They
want them to trust and buy Apple products! Unlocking that smart phone would
cost Apple billions in foreign purchase orders.

~~~
SkyMarshal
_> Apple supplies smart phones to the WORLD._

This has been my assumption from the start of this case too. Apple can't
afford to lose China, if only for the purpose of avoiding negative quarterly
growth reports. Becoming known by the Chinese to be hackable by the FBI,
wouldn't go over well there.

~~~
x0x0
Not to mention the (obvious, ugly) next step: every country in the world
demands the exact same privileges the fbi get. And why shouldn't they?

This may not be avoidable. Even blackberry had to do this ([1], dozens more).
But if anyone has strong enough market power to push governments towards
privacy, it's apple.

[1]
[http://www.theguardian.com/technology/2010/aug/10/blackberry...](http://www.theguardian.com/technology/2010/aug/10/blackberry-
saudi-arabia-ban-lifted)

------
johnloeber
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.)

~~~
coldtea
> _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.

~~~
gergles
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.

~~~
coldtea
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.

------
Tloewald
There's a certain group of people who seem determined to see some
Machiavellian motives behind Apple defending the security of its (and
everybody's) encryption.

It's not just about making money. It's not just a marketing pitch. It's not
just because it's technically stupid to do what the FBI wants. It's not purely
driven by Apple's concern for its customers.

It's _all_ of those things at once. Everyone in the industry thinks the FBI is
being boneheaded. The current and former heads of the NSA think the FBI is
being boneheaded. Google, Microsoft, and Amazon.

You don't need to look behind the _obvious_ motives for something underhanded.
It's. freaking. obvious.

------
pdkl95
Susan Landau, during[1] the House Judiciary Committee hearing:

    
    
        Smart phones are increasingly wallets, and they give us access to all
        sorts of accounts [...]. NSA will tell you that stealing login credentials
        is the most effective way into a system. [...] Here's where smart phones
        are extremely important: they are poised to become authenticators to a wide
        variety of services.
    

While I think that Apple has good reasons to fight the FBI's order for simple
constitutional reasons, they obviously are not limited to a single motive.
This comment about phones being "wallets" does fit with the idea of Apple
being some sort of bank (or payment processor).

[1]
[https://www.youtube.com/watch?v=g1GgnbN9oNw#t=12977](https://www.youtube.com/watch?v=g1GgnbN9oNw#t=12977)

~~~
krrrh
Wallets is too limited though. Increasingly a phone is not only a wallet
replacement, but also a replacement for filing cabinets, bookshelves, photo
albums… to the point where having unfettered access to a smartphone is akin to
having access to someone's living room and office.

~~~
pdkl95
> photo albums

Dr. Landau mentions this kind of use just prior to my t=12977 link to the
hearing. I'm specifically quoting the part that seemed relevant to Stross's
banking theory.

------
l33tbro
I just don't see it. Haven't we learnt over the last few years that consumers
just don't seem to give a shit about their data? Conversely, even Apple not
handing over keys to the FBI still doesn't put privacy-concerned folks like us
at ease about an Apple Pay service (my peers and I, at least).

I actually kind of see it as being of no importance which way the coin falls
here on what's been triggered by the San Bernardino case. The security
oblivious will remain oblivious regardless of the outcome (identity politics
and the Kardashians are far more compelling than encryption). Equally, the
skeptical amongst us will remain skeptical - even if Cook holds onto the
Iphone encryption we'll always be suspicious of backroom deals or potential
backdoors. Whatever the fallout, neither scenario infringes on the legitimacy
of Apple as a financial institution - should that even be their play.

~~~
coldtea
> _I just don 't see it. Haven't we learnt over the last few years that
> consumers just don't seem to give a shit about their data?_

No, when it comes to their banking accounts and e-wallets, we haven't.

~~~
mdpopescu
I was the initial developer on a system where the customers gave us access to
their bank account and we would use their transactions to come up with
(ultimately) an overall credit score.

Not just read-only access: their username and password. I was sure that would
never fly. I was wrong - they had at least a few thousand customers in three
months after launch. I don't know if that's a success, given the US
population, but more than the zero I expected.

So... I think convenience trumps even bank account privacy.

~~~
pdkl95
> username and password

That's fairly strong evidence of _ignorance_ , not _consent_.

------
matt_wulfeck
What if what it's really about is that Tim Cook values privacy more than his
predecessor and thinks it's important that his products reflect that value?

Given his position and the overreaching request by the FBI, I think most of us
privacy-conscious HNers would behave the same.

------
HappyTypist
Apple becoming a bank makes some sense. It can start quite innocuous, with
iTunes balances being integrated into Apple Pay somehow. Soon, allow
transferring such credit between users. "Gift your friends iTunes credit right
from the app."

------
draw_down
It's an interesting line of thought but I feel like there is no indication
Apple execs really think this way. It still seems to me like they think
they're a consumer electronics company. Tim Cook and Jony Ive slavering over
entering the financial industry, I just don't see it.

When you're analyzing something, "follow the money" is always good advice. But
I think it's much simpler here, following the money just means that at this
point, Apple is the iPhone company, and they're going to do everything they
can to guard that business. That's why they went so berserk with lawsuits
regarding Android.

~~~
forgetsusername
> _It still seems to me like they think they 're a consumer electronics
> company_

It's their bread and butter, obviously.

But as the article makes clear, there is a specific type of problem associated
with having as much money as Apple does, and it becomes a business in itself
trying to manage those finances. Eventually, if it hasn't already, that
management becomes _the_ business, whether Jony Ive wants it to be or not.

~~~
snowwrestler
What does that have to do with becoming a bank or payments processor, though?

I think the article is premised on a misunderstanding of what banks are and
are not. A company does not need to be a bank or payments processor to manage
a huge pile of money for a profit goal. In fact it's way easier to do that if
a company is _not_ a bank or processor.

------
dood
Putting on cyberpunk goggles, you could take the idea a step further and
speculate that Apple is preparing to become a transnational entity, and
doesn't want pesky nation-states dragging it down. They already have revenue
around the GDP of Hong Kong or Israel.

~~~
snowwrestler
The cyberpunk were wrong; the Internet has made nations stronger than ever.
The NSA hacks Google and Apple, not the other way around.

~~~
aplummer
Don't you get it, that's what they want you to think.

------
martin_drapeau
I don't think Apple will become a bank. They could however replace VISA and
Mastercard in the long term, and grab the 2% to 5% of payment fee over each
transaction. Vertical integration to its best. To get there, merchants need to
support Apple Pay, and Apple needs to continue selling phones. In the near
future, there will be more Apple Pay enabled devices in circulation than VISAs
and Mastercards. When the scale tips, credit cards will be doomed.

~~~
TheLogothete
Don't you need credit cards to use apple pay?

~~~
dyladan
Sure, now. In 5 years who knows? I could definitely see AAPL partnering with
visa/mastercard/amex or even directly with banks for direct account access on
a program that doesn't require a physical card. Plastic cards will become the
new cash (right now cash-only businesses are a little behind the times but
they still exist) and phone payments will become the new plastic.

~~~
TheLogothete
Partnering? Sure! I think this will be the way forward, but the GP says Apple
is out to get VISA and MC (as companies) and will leapfrog them with one clean
swoop. This will most definitely not happen.

------
pfarnsworth
No. The reason why Apple cares is because if everyone knew the US government
could snoop on their messages and iPhone information at will, no one around
the world would buy iPhones or Apple products again, due to the halo factor.
It would be instant death. So Apple needs to tell the world that their
information is secure from every government. Otherwise they will be out of
business.

~~~
mercurial
I fail to see the pitchfork-wielding crowd making its way to to the parliament
of all western countries engaged in large-scale snooping (that is, most or all
of them). Probably because people don't give a damn about the government
reading their mail ("I have nothing to hide"/"Google is already reading it
anyway").

------
ikeboy
>The FBI thought they were asking for a way to unlock a mobile phone, because
the FBI is myopically focussed on past criminal investigations, not the future
of the technology industry, and the FBI did not understand that they were
actually asking for a way to tracelessly unlock and mess with every ATM and
credit card on the planet circa 2030 (if not via Apple, then via the other
phone OSs, once the festering security fleapit that is Android wakes up and
smells the money).

Except the phone they were asking is a 5C, which doesn't support Apple Pay
because it doesn't have a secure enclave or fingerprint reader.

Risk management: call me back when they figure it out.
[http://www.nytimes.com/2015/03/17/business/banks-find-
fraud-...](http://www.nytimes.com/2015/03/17/business/banks-find-fraud-
abounds-in-apple-pay.html)

~~~
ubernostrum
_Risk management: call me back when they figure it out_

Quoting article you linked: "the banks may largely have themselves to blame."

Apple Pay appears to be a secure system, and was designed by engineers to be
such. The process of _getting a credit card loaded into Apple Pay_ appears to
be a woefully insecure system, and was designed by banks to meet the bare
minimum of regulatory compliance and no more.

Some banks actually perform some due diligence; one of my cards, when I added
it on my phone, required some verification steps to prove to the issuing bank
that I was indeed the cardholder I was claiming to be. But another simply
loaded onto the phone instantly with no verification. It doesn't take me long
to figure out how that leads to fraud.

~~~
ikeboy
>Because Apple wanted its system to have the simplicity for which it has
become famous and wanted to make the sign-up process “frictionless,” the
company required little beyond basic credit card information about a user.

>Some bank executives acknowledged that they were were so scared of Apple that
they didn’t speak up. The banks didn’t press the company for fear that they
would not be included among the initial issuers on Apple Pay.

Sounds like there was pressure from Apple.

Regardless, there's absolutely no sign of the security claimed by OP. You'd at
least expect parity security, not an order of magnitude more.

------
snowwrestler
This makes no sense. In order to act like a bank, Apple would have to track
every financial transaction centrally in order to provide for auditing and
reconciliation. There are already plenty of laws that give law enforcement the
power to subpoena that info. Strong device security is no impediment at all if
Apple is a bank.

~~~
empath75
Not if they put crypto currency wallets in there.

------
Jerry2
> _Early iterations of the iPhone notoriously lied about the security of SSL
> connections to email servers; my understanding is that this led to them
> being banned from some corporate and government accounts for a few years._

What? Never heard about this. Is he bullshitting about this or is there some
validity behind this claim?

~~~
bendbro
I found a number of articles referencing this IOS 4.2 SSL vulnerability.
[http://www.peterbance.co.uk/information-security-
articles/ss...](http://www.peterbance.co.uk/information-security-articles/ssl-
vulnerability-in-apple-ios/)

It's somewhat difficult to find the event on Google due to results of the
search being masked by the last IOS "goto fail" SSL vulnerability.
[http://arstechnica.com/security/2015/04/critical-https-
bug-m...](http://arstechnica.com/security/2015/04/critical-https-bug-may-
open-25000-ios-apps-to-eavesdropping-attacks/)

While I'd imagine this is open to some interpretation, IOS is the least secure
mobile OS, at least in terms of the number of vulnerabilities it has. It is
not worth believing it is immume from the same failings of other OSes.
[http://venturebeat.com/2015/12/31/software-with-the-most-
vul...](http://venturebeat.com/2015/12/31/software-with-the-most-
vulnerabilities-in-2015-mac-os-x-ios-and-flash/)

~~~
Jerry2
None of those links address the claim about SSL and email. And iOS4 is not an
"early" iPhone.

~~~
bendbro
I wanted to come back and say I was too quick to judge on the vulnerability
article.

This data doesn't indicate whether bugs were found and patched internally, or
were actually exposed first by malware.

------
fweespee_ch
As much as I like Antipope, I think he is overestimating the long term
thinking of the Apple business because the time to have started the "Apple
Bank" process is 2014 because they should have just acquired Simple:

[http://techcrunch.com/2014/02/20/simple-acquired-
for-117m-wi...](http://techcrunch.com/2014/02/20/simple-acquired-
for-117m-will-continue-to-operate-separately-under-its-own-brand/)

Then moved on from there and making it into "Simple, The Apple Bank". The fact
they didn't move in that direction makes me think it never really occurred to
them.

------
crusso
_If the FBI get what they want, then the back door will be installed and the
next-generation payments infrastructure will be just as prone to fraud as the
last-generation card infrastructure, with its card skimmers and identity
theft._

How Stross made the leap from a special version of the OS that the FBI could
use to eventually crack a password to the easy clone-on-use nature of a card
skimmer is completely farcical and looks like something that the mainstream
non-tech press would come up with.

Just as prone to fraud? I don't understand the need for that kind of hyperbole
in an article that looks like it was intended to be taken seriously.

~~~
merpnderp
Look I dislike that kind of hyperbole also. But I think there is a clearly
defined middle step. If the FBI can force Apple to create a new OS. They can
force them to install backdoors in every new OS. Then the phones become
"...just as prone to fraud as the last-generation card infrastructure."

And given Juniper systems was likely a government placed backdoor, there is
ample evidence this is true.

------
YeGoblynQueenne
>> Their phones are, in many respects, more secure than the ATMs and credit
card infrastructure we've used to accessing our bank accounts.

Well, except that the ATM doesn't permanently store your credentials,
potentially[1] making them available to anyone who takes possession of it.

Not to mention: it's possible, though not easy, to take possession of a whole
ATM. However, the people who have done so were after the bank's money, not
_your money_.

Whereas if someone steals _your device_ they're potentially[1] getting hold of
_your money_.

_____________________

[1] Read: it's only a matter of time.

------
jswny
Apple has an obligation as a financial institution to win this case. Apple is
a business, and it has customers who won't want to buy phones which they know
are purposefully compromised from a security standpoint. In addition, those
customers don't want to buy phones for which the US government has unlimited
access to. Apple has a financial interest to keep their devices as secure as
possible and act in the interests of their customers, the ones who drive their
business.

------
girkyturkey
I completely understand why Apple is not backing down on this. Even if this
backdoor is for one phone, the possibility of having that backdoor stolen is
too great a risk to produce. When looking at the big picture, Apple is looking
at the side effects this backdoor could produce and doesn't want to take the
risk. I can hardly blame them either!

~~~
lazylester
seems to me the risk of having the backdoor stolen is an overstated
vulnerability. Isn't it the same risk as having the iphone source code stolen?
Hasn't happened yet has it? If the source code were stolen, someone else could
engineer a backdoor. I don't think the overall security risk increases by the
existence of a backdoor on a single phone. Amiwrong? That said, I'm happy that
Apple is pushing back, but let's be clear about the technical facts.

~~~
fucking_tragedy
To be clear about the technical facts: good luck pushing that engineered
backdoor to an iPhone without Apple's keys.

Having your source code stolen gives your competitors an edge by letting them
know, for free, how you've implemented things that might have cost you
millions/billions to research and produce.

The biggest threat to having source code stolen is exposing the potentially
embarrassing paperclips, string and gum holding a product together.

> Hasn't happened yet has it?

Years ago and at the time the most profitable software company, Microsoft had
its flagship products, the NT kernel and Windows 2000, source code leak.

It isn't unheard of.

> I don't think the overall security risk increases by the existence of a
> backdoor on a single phone.

If the precedent is set for this single phone, then the security of other
phones is at stake. This is also a red herring. It is not about this singular
phone.

edit: You do not need the source code to find a backdoor or vulnerability[0]

[0] every closed-source product that's ever been exploited

------
peyton
It seems more likely Apple wants leverage over banks to cut exclusive deals in
order to sell more devices.

The retail banking industry suffers from low consumer satisfaction, as it
earns the bulk of its profits via fees, personal loans, and mortgages. Apple
historically wants no part of that. Competing on margin by mitigating fraud
doesn't make sense.

------
blinkingled
It's too far fetched esp given a very simple incentive exists for Apple to be
pro-privacy - market differentiation.

Given Tim Cook's background he may also truly believe in privacy for the
masses but that's a byproduct. Apple knows that with all their competitors
slowly but steadily stepping up their game and offering solid smartphones for
1/3rd of the iPhone's price and little practically left to do for Apple to
stand out in non-USA markets, privacy is their one big appeal. That plus lower
priced iPhones and Apple's brand value practically guarantee that Apple will
stay ahead - take out one leg and it starts to look shaky.

I think they'll continue to emphasize it to sell iPhones until they find
another market that's as lucrative as the iPhone is.

------
adventured
> Its legendary $120-150Bn in cash

For all the dramatic prose in this article about Apple's finances, they
managed to miss by a fair bit on how much cash Apple has.

It's closer to $215 billion. $16.6b in cash or equiv, $21.3b in short-term,
$177b in long-term marketable securities (most of which can be converted to
cash relatively quickly, so when calculating Apple's cash pile that is
commonly included).

If you remove their $53b in long-term debt (which has a very low interest cost
on it) you get $162b. The article didn't specify that it was subtracting debt
of course.

------
tryitnow
This makes sense to me at a high level. A bit too wordy for my tastes but yes,
if I were Apple I'd want to be super secure in part because I want to be big
player in the payments arena.

Although it makes it's not particularly revealing. Yes, companies want more
control over security because that allows them to pursue business
opportunities. No need to even follow the money here, it's just common sense.

------
rvooda
There are many theories in this post, but no facts.

As the comments depict, becoming a bank will only make things harder and if
someone trying to get profits out of a product or a service is wrong, then
everything in this world is wrong.

You are talking about legacy software used by banks. Are you trying to say
that we should not advance in financial systems? Or are you saying that they
are superficially unbreakable?

~~~
neotek
I think the author is saying neither of those things, but that bank software
is pretty much uniformly rooted in the stone age, updates come at a glacial
pace, and Apple could use its significant software engineering prowess to
build something substantially better.

He gives the example of Apple being in a better position to detect fraud, for
instance, by virtue of the fact that Apple knows where your phone / watch is,
and by extension where you are, compared to a credit card company that only
knows where your card has been used.

------
gopher2
Not just Apple Pay or being a bank, also about health data and about being
trusted in other markets than United States. Good article, though.

------
martin_drapeau
Apple Pay sits on top of the credit card industry. Do you believe they will
remove that layer one day, and tie directly to your bank account? As I
understand the payment industry is incestuous and has become a commodity. Its
ripe for anyone to replace it. Apple seems to be in a good position to do that
over time.

~~~
snowwrestler
I don't know why they would bother.

Apple Pay as architected now outsources all the pains in the butt to the
existing payment processors: getting terminals into stores, dealing with
chargebacks and fraud, and providing regulatory compliance.

Apple gets to deal only with with their existing customer base, take a tiny
tax for authenticating transactions, and enhance the value perception of the
iPhone and Watch, which is where they actually make their money.

~~~
martin_drapeau
Credit Cards, issuers, acquirers, gateways, etc - the whole payment
intermediary grabs around 3%. Most of that could all go to Apple one day. Why
leave it on the table?

------
oldmanjay
What is the purpose in speculating the one true reason that Apple is doing
this? They're a massive company with many needs and desires, so there are
probably many interlocking factors here. Chasing the simple narrative is a
very human game, but it's not really purposeful, it's just play.

------
crdoconnor
This doesn't add up. The biggest asset that the US TBTF banks have right now
is their tight relationship with the federal government.

Apple could certainly start competing on their home turf with respect to
payments and checking accounts, but there's very little profit in that.

------
mattiemass
I think the premise of following money is interesting, but the conclusion I
completely disagree with. I believe Apple's focus on privacy is a direct
challenge to Google's business model. Apple makes all their money from mobile
device sales, don't they?

~~~
petra
But maybe the growth in the phone business is limited - so they look for
various services like music/tv, and banking could be one such service.

------
Steko
> unlike the banks and the credit card settlement network they're not running
> on incrementally upgraded legacy infrastructure designed in the 1950s

Good point, Apple's incrementally upgraded legacy infrastructure was designed
in the 1990s.

------
pksadiq
Hm... An article with no concrete proof.

Then, here is my story about Apple vs FBI (sceptical too).

FBI (really, NSA) knows of only one phone (company) that is easily crackable,
and its IPhone.

So Why a sue?

This has to be taken utmost care. When FBI sues against Apple, and they say
they can't crack (some say, hack), people think that its true, and they trust
more in Iphone. Result: More sales for Iphone. FBI (NSA) has more phones
crackable. Benefit is for both.

So Why Android is less crackable? Answer: It's not. But a user can easily
replace it OS with something safe (like, another android like replcant OS).
So, FBI (NSA) shall have to try harder to break into.

So why not windows phone? Hm... You should not store any obsolete data in your
mind.

Thank you.

~~~
RubyPinch
except the FBI changed course, not only saying that the iphone was hackable,
but that it was hackable by groups other than the government, which, if
someone valued their privacy, they would probably find that statement
concerning

------
ibn-alfatal
Around 2030 there will likely be a quantum computer running Shor's algorithm
efficiently.

------
stretchwithme
I think Apple's motivation to maintain security a lot simpler. Apple had to
demonstrate to the Chinese government that its devices were secure and could
not be used to spy on Chinese users. If Apple gives up on that, they'll lose
those sales.

------
jimminy
Apple is already operating a private hedge fund to deal with their excess
capital.

[https://en.m.wikipedia.org/wiki/Braeburn_Capital](https://en.m.wikipedia.org/wiki/Braeburn_Capital)

------
known
1\. Regulate market capitalization 2\. Tax corporate revenues

------
dm_mongodb
this in no way effects whether one is trusted for payments.

------
thomasahle
TL;DR: Apple wants us to trust them, because they want to build a bank.

~~~
coldtea
Actually, go read the article. It's worth it, and has much more nuance than
this.

------
guard-of-terra
It is about our freedoms and we've got to defend them!

------
venomsnake
FBI only needs Apple signing keys. And as lavabit showed - they can compel
Apple to produce them.

Apple are a big company - they cannot be trusted by default. And banks right
now make their money in two ways - gambling with the money of the rich and
using all kind of creative late fees to prey on the poor. Neither of those
requires uber secure pocket ATM.

~~~
adventured
That's incorrect. The major US banks today do not primarily make their money
from either gambling with the wealth of rich people, or from low income
banking. Not even remotely close.

The second largest business for Wells Fargo - America's most valuable bank -
for example, is wholesale banking from businesses with at least $20m in sales,
where they get about 35%-40% of their profit.

You'll find that an extremely small percentage of profit is derived from 'the
poor' in Wells Fargo's business (the same holds true for Citi, BofA and JP
Morgan). Their community banking segment, which targets the median and higher,
is their prime profit center, contributing about 60% of their profit. You
don't earn $23 billion per year in profit on late fees from the poor, very few
of whom have accounts with Wells Fargo to begin with.

One very quick look at the largest financial services companies that do target
the relatively poor, reveals how little profit there is in that segment
compared to what the big banks do. It doesn't scratch the surface for a
company the size of Wells Fargo.

~~~
forgotpwtomain
> That's incorrect. The major US banks today do not primarily make their money
> from either gambling with the wealth of rich people, or from low income
> banking. Not even remotely close.

For US banks - 42.3 billion collected in account fees over 12 months, 32.5
billion of which were over-draft fees. So yeah, quite a bit of it they do.*

[0] time.com/money/4071290/bank-overdraft-charges-fees/

------
julie1
The elephant in the room is we are building a new religion based on
technology.

FBI & Apple are both stupid.

Computers always ends up to be used in a real physical world. This is called
the analogic hole.

This has since decades enable to weaken crypto with side channels (temperature
of CPU, times of computation, EM radiation, noise of the keys...).

And how useful is it to spend billions of dollars to break new technologies
when at the end human will still interact with computers with analog means?

Microphones, cameras are still working. And it covers 30% of the surface of
what a secret service requires to be able to know. And cold war has left
government with more than enough cheap efficient technologies. Being smart and
foxy covers 15%. 5% is PURE LUCK.

Science is about aligning the cost of detection with its efficiency. Crypto is
efficiently made so that breaking algorithms is more and more costly.
Detection by measure/math is always failing at one point. (false
positive/negative)

And what about the remaining 50% ? It is HUMINT. When people love the place
where they live and trust their government they are more likely to snitch the
criminals. To help keep the social peace.

Yes, social concord is what protect a nation. People feeling united and
trusting their own governments.

I think that electronic intelligence is counterproductive.

I also believe we would live in a better world if laws and moral where in sync
with who we really are. If we did not required secrecy to be who we are
because governments made illegal stuff that are not crime, except in the eyes
of a minority.

Education could help too; people when fearful are behaving like dangerous
trapped animals. Education purpose is not about making citizens obedient or
fearful, it is about making them able to become political leaders themselves.

Every citizens should be trained in the optic they will be a member of the
parliament. The next Benjamin Franklin, Roosevelt, JFK, Lincoln ...

USA has beaten the former colonial power with education. Scientific education.
It could be time USA become a great nation again.

