Apple promotes plans to turn iPhones into digital identity cards

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Apple is including US states in a plan to turn iPhones into digital identification cards, according to confidential documents obtained by CNBC.

Based on a contract signed by the four states, Apple requires the states to maintain the systems necessary to issue and provide credentials, hire project managers to answer company questions, continue to Highlight the new feature and promote its adoption with other government agencies. Everything is paid for by taxpayers’ money.

In June 2021, Apple announced that users could soon store state-issued identification cards in the Wallet app on iPhone. The giant tech US says it’s a more secure, convenient way for customers to provide credentials in a variety of in-person and remote settings. This feature, when combined with Apple’s biometric security measures like Face ID, can reduce fraud.

However, the move has led observers to question why the state government has ceded monopoly control of citizens’ identities to a private technology corporation . In addition, the integration of identity into mobile devices also raises privacy concerns, along with the risk of confusing situations related to surveillance.

The contract between Apple and the four states of Georgia, Arizona, Kentucky, Oklahoma provides a rare glimpse into the transaction of this mighty company. Apple is known for its obsession with secrecy. The company often forces potential partners to sign non-disclosure agreements to prevent their documents from being released to the public.

“Full discretion”

The seven-page agreement, obtained by CNBC through a request for public records and other sources, largely describes Apple’s high degree of control over government agencies responsible for issuing identity cards. . Georgia and Arizona will be the first two states to offer driver licenses on the Wallet app, but have yet to launch the program. Because the contracts obtained were virtually identical state-to-state, CNBC didn’t go into too much detail about the agreement for the four new states that signed up for Apple’s digital ID program, including Connecticut, Iowa, Maryland, and Connecticut. Utah.

Apple has “full discretion” over key aspects of the program, including what types of devices will be compatible with Digital ID, how statuses are required to report on plan performance, and how long. program launch point. Apple even gets to review and approve the marketing that states are required to do. According to Jason Mikula, a financial technology consultant who had access to the contract, the move is similar to how Apple typically deals with suppliers, although instead of being paid by Apple, states have to shoulder the financial burden of program management.

“It’s like a supplier relationship. This makes a lot of sense to me because those are the states that inherently have a say in what they want to give Apple. They could have negotiated a much more equal contract. I have not seen any other example where the system is owned by the government and the credentials are made available for commercial purposes in this way,” Mikula said.

Apple declined to comment. Representatives for the states of Georgia, Arizona, Kentucky and Oklahoma also did not immediately respond to requests for comment from CNBC.

Along with the digitization of industries from finance to entertainment, there is a push around the world to create a more modern digital ID system . But according to Phillip Phan, a professor at School Business Johns Hopkins Carey , efforts in countries like Singapore, France, Germany and China are often done at the national level rather than through private companies.

Apple is in control

Throughout the content of the contract, one thing is very clear about who is the “driver”. Apple is asking states to comply with a security requirement put forth by the International Organization for Standardization regarding mobile driver licenses. In September 2021, Apple said it had played an active role in the development of the standard. States must agree to “reasonably allocate sufficient personnel and resources, such as staff, project management, and funding, to support the launch of the program by a timeline determined by Apple.” That includes performing quality checks to make sure the digital ID works “in accordance with Apple’s certification requirements” on the company’s various devices.

In addition, states must agree to a wide-ranging effort designed to ensure the adoption of Apple’s digital ID, including the “proactive” and free delivery of the new feature. whenever a citizen receives a new identification card or a replacement card. States must also help promote new ID adoption with “key stakeholders in federal and state government,” such as the Internal Revenue Service, state law enforcement, and capital businesses. restricting users by age is “critical for the program to achieve sufficient acceptance”.

It is worth noting that, although public agencies must “highlight the program in all communications relevant to the public and to Digital Identity Credentials,” marketing efforts ” in all cases subject to prior review and approval by Apple. The cost of all of this is covered by the states. The contract states that, “unless otherwise agreed between the parties, the parties are not permitted to owe each other any fees under this agreement.”

No guard rail

The upshot is that states have to bear the burden of maintaining the technology at the expense of taxes, while Apple and its shareholders benefit from having their equipment even more essential than it is today. in.

“Apple’s interest is clear, it’s selling more iPhones. The state’s interest is in serving its people, but I’m not sure why they think a partnership with a particular tech company with a closed ecosystem is the best way to do it. It is questionable that the state spends taxpayers’ money on a product that only serves half of its citizens,” said Phan.

The Wallet app is not Apple’s main source of revenue, although it does generate fees from Apple Pay transactions. Instead, the Wallet app and other services are a strategic feature to make the iPhone more valuable to customers and keep them from switching to a competitor like Google’s Android.

It is important in the contract that Apple shifts responsibility for verifying the authenticity of a user’s identity into a statement: “Apple will not be liable for any results of the verification, and its receive all verification results provided as-is.”

According to Mr. Mikula, the agreement highlights the missing elements, constraints or guardrails related to how Apple can use its powerful identity verification capabilities. That raises the question of whether the company can restrict access to new capabilities to competitors’ products.

“Apple often takes advantage of its dominant position in the hardware and software sectors to favor its own services, and exact fees from third parties that use its platform,” Mikula said.

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