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Sunday, July 17, 2011

Starbucks' new iPhone app a risk for identity theft?

According to 9News.com (Colorado's News Leader), Starbucks' new iPhone app, that allows iPhone users to pay for purchases, check gift card balances and purchase gift cards for others, is causing identity theft concerns.

Actually, the identity theft concerns are not really related to Starbucks' app as the concerns would apply to many apps.  Any app that encourages the storage of personal financial information (i.e. credit card info, passwords, etc.) on a mobile device increases the chances of identity theft, just because mobile phones are easier to lose than a desktop computer.  Just ask my niece, who loses her cell phone at what seems like a rate of one a month.  But that's a subject for another blog.

One of the next waves of technology will no doubt be some way to pay for purchases using your cell phone rather than a credit card.  But the trade off for something so convenient is the increased risk of identity theft.  Just like the trade off of being able to receive instant credit decisions while you wait to buy a toaster at Sears is that the decision must be based on information that can be transmitted to Sears while you wait.

True story - I once had a client who was unable to purchase a toaster on credit at a Sears because of an error on his credit report.  The defendant in the case was Experian, one of the three national credit bureaus.  Their argument regarding the credit denial was that he was not denied credit due to the error but due to the statement added to his credit report regarding the error, indicating that he was an identity theft victim and that he should be called at his home number to verify his identity before being granted credit.  In the case of instant credit, he would never be home to receive the verification call, since he would be out shopping, waiting for the credit decision.  Kind of a catch 22, huh?  Client should have used his cell phone number but, then again, this was back before everyone had cell phones.

Anyway, the trade off for "instant" stuff is almost always going to be an increased risk of something such as identity theft.  The trick is first recognizing the increased risk and then building safeguards into the app to handle the increased risk.  Hopefully, the apps of Starbucks and others take this into account when designing their apps.

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