Online Payments by Smart Phone are Not Always a Smart Idea

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The world has gone mobile and as digital devices become progressively smarter, consumers also need to be smarter about how they use them. More specifically, consumers should get into the habit of not using digital devices haphazardly when it comes to transmission of sensitive financial data. Electronic payments and withdrawals by phone can be done securely, but it requires lots of vigilance and a modicum of restraint. Behaviors like online bill paying and shopping do have the potential to put your credit and financial accounts at risk. Taking steps to avoid that kind of unwanted exposure isn’t paranoid, it’s prudent.

Someday soon, our portable communications devices will likely be just as secure as our home computers, but that day has not yet arrived. Right now crimes of identity theft and financial fraud are successfully moving in lockstep with digital communications technology, in terms of seriousness, prevalence and sophistication.

Smart phones, for instance, are relatively easy to hack – even if their owners use secure networks. Although you think your phone is safe and secure, it may be vulnerable. That’s not necessarily your fault, it’s just that security protocols are lagging behind as the technology catapults forward at breakneck speed. So don’t let the ease and convenience of using a portable device like a smart phone lull you into a false sense of security.

Sneaking in via Software

How do the thieves manage to get through those security barriers? One way to think of it is to see these cyber sleuths as burglars, and your smart phone or similar portable communications device as your home. They can break down the back door or climb through a window, but a more finessed way to gain access is to get hired as your babysitter or invited to one of your parties. That way they can do their mischief right under your nose.

Similarly, bad guys sometimes simply offer a free knockoff version of a popular game like Words with Friends or Angry Birds, for instance, which includes surreptitiously embedded software that enables tracking and viewing. Say, for example, a ring of sneaky thieves created a cool game that children like to play that’s offered for free. A busy mom may agree to download that kind of child-appropriate game app on her smart phone, without considering the potential for a serious security breach. She just wants to keep her youngster entertained and happy.

Unbeknownst to her, however, the cute little app has been engineered specifically as a carrier for a software virus. So while her child is innocently playing on the phone, the game he’s using plants bugs that can track every keystroke, read every email, record every account number, and steal all of Mom’s complicated and diligently constructed passwords. Bingo! Now the crooks have just as much access to that device as does its legitimate owner. The only difference is that she has no idea that they are there, stalking her every move and silently robbing her blind.

Stealing Hardware

There are more straightforward ways to steal what’s on a smart phone, of course, and those are just as dangerous. Instead of bothering to burrow into the guts of the phone with software, thieves can just grab the phone and run. Every day smart phones are snatched from people’s hands or lifted from coffee shop countertops while the phone’s owner is busy paying the cashier. Stealing them can be a lucrative criminal profession, because a single smart phone might be worth $400-$500 dollars at the retail level.

In fact, CNN recently reported that the crime rate in New York City was significantly higher thanks to gadget thievery. According to the Deputy Police Commissioner, the Big Apple would have seen a measurable decrease in crime in 2012, had it not been for a dramatic surge in thefts of products manufactured by the other big apple, namely Apple, Inc. With crimes related to smart phones and other gadgets factored into the equation, New York’s crime jumped three percent. Crooks in New York City are stealing so many desirable gadgets that NYPD created a brand new special police unit devoted solely to investigating crimes involving stolen mobile devices.

iStock_000024509549SmallThe Value of What’s Inside the Hardware
Beyond the tempting appeal that high-tech hardware holds for thieves, however, the confidential financial data stored on and shared between those devices is what holds the most valuable criminal appeal. While a stolen phone might be worth a fast buck on the street, stolen data is a potential gold mine. A smart phone thief may steal credit card numbers and gain fast access to online store accounts as well as bank or brokerage accounts.

You may have protocols in place to remotely erase and disable your smart phone once it disappears, but it only takes a skillful thief a few moments to get inside that phone and steal the contents. Do you have your smart phone password protected to lock it when you aren’t using it? That’s definitely a good idea, because it puts one more hurdle between the bad guys and you.

Be Smart and Be Safe

Treat your smart phone as if it were your wallet or purse. In this day and age it may serve the purpose of a digital pocketbook or checkbook. Don’t put it down anywhere without first locking it, and don’t let it out of your sight in a public place. Never expose your phone to public WiFi, and don’t send sensitive financial information via text or email that might wind up stored inside your phone.

When it comes to app downloads, be careful, and only accept those from authorized vendors like the Apple App Store who have protocols in place to screen them ahead of time. Is your child using your smart phone? Kids are clever, and they may figure out how to download, upload and text in ways that compromise your security – so share your device responsibly.

If you conduct financial transactions through a smart phone – such as online payments – make sure that you are using a secure and encrypted wireless network. In most cases, that means using your carrier’s own 3G or 4G network, or one of their secure, portable hotspots.

Meanwhile check out this cool diagram from Koolspan about all the ways your information can be compromised through your phone.  We’ll be adding more articles about smart phone security and online transactions this week.

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by any card issuer.

*The content in this article is accurate at the publishing date, and may be subject to changes per the card issuer.

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