Tuesday, April 19, 2011

Technology is great and dangerous

In 1994 I moved to California to go to college. Just a few weeks in San Diego my girlfriend from Germany came to visit me. I decided to take her on a wonderful trip from San Diego up North to San Francisco. It was wonderful and romantic, we saw LA, Santa Barbara, Hearst Castle, Monterey Bay and many other nice places till we arrived in San Francisco.

In San Francisco we decided to go to a cabaret to enjoy a show. The show was great and we had good dinner. I gave the waiter my American Express Card. He took the card, left our table and came 10 minutes later back with my card. I signed the receipt and we went to our hotel. The next morning we needed gas and my card did not work. As I looked at the card I got suspicious and called Amex. After a short talk we figured out that the place (which was were I used the card the last time) did replace my card with a fake card. Amex did freeze my card but somebody had already bought something for over $2000. Lucky I got my money from Amex back.

12 years later, and back in the US, I forgot my card in bar, somebody must found it and charged in a time period of two weeks (till I saw the statement) 12 times different fast food chains with each bill in average $60, I even did not know somebody can spend so much on fast food. I did not know that I lost my card because i usually don't use it, and did only figure it out when I saw my statement. As well here I got my money from the credit card company back, but I had file claims, order a new card etc.

Now we write the year 2011 and it gets even easier for stealing card information and to charge your card.
Somebody does only need to invest $9.95, needs an iPhone developer kit and some little coding know how.

Apple is now offering through a 3rd party Square Credit Card Reader. This reader connects to the iPhone and can read any credit card by swiping through. The idea is that everybody can download the free app and use the reader to charge credit cards without monthly fees or contracts. Every transaction will charge 2.75% extra for using the service. All NY hotdog stands can now easily accept credit cards, hurray I don't need cash anymore.

However a smart developer with criminal ideas could use the reader and write his own software to read credit cards and to make transactions.

Imagine in a few days or weeks you are walking through NY City, somebody bumps you, steels your credit card, put it through the reader on the iPhone and gives you the credit back, that you never know the card was missing. A few minutes and miles later this person is going to charge your credit card and you don't know it till you see your statement.

But there are other criminal opportunities. Kids and dealers can now sell drugs at schools and easily accept credit cards instead of cash only. Of course the person would be stupid if somebody finds out because the transactions could be easily traced.

Or imagine how many payments will be done on the street at hod dog stands or at Canal Street, maybe just $5 a transaction. How easy it will be by accident to sign $50 transaction instead of $5.

The idea of the reader is great but making credit card payments mainstream will produce more crime and problems than good things.

And I am even not sure if you are allowed to accept credit card payments without having a registered business.

I ordered the square reader and let you know how easy mistakes could happen as soon I tested it.

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  1. Markus, how can Square decrease the security of something that is already

    One just needs to photograph your card or even just memorize its number, and he has everything needed to cash out.

  2. VG,
    of course it is already unsecure but making it easier helps to get more crimials to do it.