Will privacy and security concerns cause Chinese consumers to rethink the Apple Watch?

Apple

WU NAN

Published: 9:45am, 16 Mar 2015

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Prospective Chinese Apple Watch buyers may be put off by increasing privacy concerns, especially related to mobile payment functions, analysts warn.

Last week CEO Tim Cook officially launched the Apple Watch, the company's first brand new product since the release of the original iPad. The Apple Watch has been described by executives as the easiest Apple device on which to use the company's mobile payment solution – Apple Pay – besides its leading iPhone smartphones.

However, industry insiders in China’s fast-growing online payment industry warned that Apple Pay, which mainly uses near-field communication (NFC) technology, may have major security issues.

“Apple Pay is no safer than any other devices using NFC technology," said Wang Bo, the CEO of Beijing-based One Card Technology, which has been promoting NFC technology to Chinese retailers in recent years.

Wang’s research team found Apple Pay had at least two main security-related issues. He said there is a chance that users' banking information might be leaked when downloading data to use Apple Pay. The use of fake NFC point-of-service machines, similar to chip-and-pin skimmers which steal credit card information, could also allow criminals to steal banking information from Apple Pay users.

Less obvious security issues include potential privacy risks. Wang said it may prove easy for users' locations to be leaked when wearing an Apple Watch, pointing out that manufacturers of wearables have often failed to secure the data they collect in the past.

As Apple Watch tracks heart rate and number of steps taken, if hackers got access to the device they could steal health data. Apple Watch's reliance on Bluetooth or WiFi to connect to users' iPhones also leaves it vulnerable to attacks.

"As the device is utilizing both it will also be interesting to see how that data can be used to track individuals in physical spaces," Ken Westin, senior security analyst at US cybersecurity firm Tripwire, told CSO.

“Cyberspace is like an invisible web which tracks and copies your information. Users should be aware that their information could be leaked at any time,” Wang said.

He was dismissive of Apple's claims that it won't collect customer data, pointing out that using Apple Pay or Apple Watch requires providing private information to Apple. In the US, Apple has met with the Federal Trade Commission to discuss how to protect the information and identities of customers, such as prohibiting the sharing of collected data with third parties.

Chinese-US relations have been strained in recent months over multiple accusations of cyber spying on both sides. Many of Beijing's complaints are related to the revelations of former US security contractor Edward Snowden. Last month, it removed major US tech manufacturers, including Apple and Cisco Systems, from approved state procurement lists, citing security concerns.

Despite potential security and privacy problems, fans of Apple products in mainland China have grown steadily.

There are more than 30 million Chinese iPhone owners, more than one tenth of the global total.

"I think [mainland] China is going to be one of the biggest, if not the biggest, market for the Apple Watch from day one," Ben Bajarin, the director of consumer technology practice at US consultants Creative Strategies, told the South China Morning Post.

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