Apple pledges to combat App Store fraud

Apple (NASDAQ:AAPL) said it is working to upgrade App Store security in the wake of multiple reports of consumer fraud. The New York Times reports App Store customers have posted thousands of online complaints indicating their iTunes users accounts have been hijacked or that some iOS applications are falsely advertised--more than 100 Twitter users vented about stolen iTunes funds in the last week alone. One Texas consumer told the NYT that his iTunes account racked up $437.71 in in-app purchases tied to the iOS game iMobster in a little more than an hour. The user has never even played the title. (The issue was resolved after he complained to Apple and his bank.) App Store fraud also poses enormous challenges for iOS developers who must deal with unauthorized purchases that consume their time and resources. Some developers report losing hundreds of thousands of dollars as a result of App Store fraud: Beijing-based Hoolai Game said a scan of its monthly payments from Apple are roughly 20 percent to 50 percent lower than its daily sales reports suggest and believes that these missing payments are fraudulent transactions that are deleted by Apple. In addition, some App Store user comments blame developers for unauthorized iTunes account charges.  Developers also fret that App Store competition has grown so intense that some companies are relying on fraudulent methods to inflate their chart rankings to generate consumer interest--last month, the News and Announcements for Apple Developers webpage posted a warning to avoid services that promise to artificially boost their App Store rankings, threatening the loss of Apple Developer Program membership for anyone found gaming the system. While it is unclear how hackers are obtaining iTunes passwords and credit card data, some Chinese online marketplaces like Taobao or DHgate offer admission to iTunes accounts promising access to thousands of dollars in "credit" for as little as $33. Other services claim to generate codes for iTunes gift cards. Users can also access forums that illustrate how to use prepaid Visa cards to get free App Store purchases. Apple declined to comment on the New York Times report but issued a statement vowing to make the App Store a more secure environment. Apple also advised customers whose payment information had been compromised to change their iTunes passwords and to contact their financial institutions. Most developers and consumers do not blame Apple for App Store fraud, but nearly all said the company could be more responsive to problems--for example, Apple does not offer a dedicated phone number to help resolve fraud and theft complaints. "Apple wants to pretend that everything is magic," said Alex Stamos, co-founder of security firm iSEC Partners, told the NYT. "They need to admit that their products can be used by bad people to do bad things." Earlier this month, the App Store surpassed the 25 billion download benchmark. The storefront now offers more than 550,000 iOS applications across 21 categories, including more than 170,000 native applications for Apple's iPad tablet. The App Store distributes applications to consumers in 123 countries worldwide, with developer payments exceeding the $4 billion mark.