Apple Purchases AuthenTec for $356 Million: Brings Fingerprint Technology to Mobile Payments

By | Aug 7, 2012

In the world of business, company takeovers and acquisitions are a common occurrence. However, Apple Inc., is one of the few tech giants that has focused on its own product developments rather than purchasing the patents and hardware of others. As noted in a news report by Reuters, the company has agreed to buy AuthenTec Inc., a developer of fingerprint sensor technology, for approximately $356 million. Although company representatives have yet to make a formal statement about the acquisition, analysts believe that the fingerprint technology will be used in an upcoming iPhone mobile payment service.

AuthenTec, a Florida-based company, has worked closely with Samsung, HP and Dell in the past. AuthenTec deals with mobile security software and has provided these computer manufacturers with fingerprint sensors; a technology that is often used for user verification, more secure logins, and to access private applications and accounts.

AuthenTec has also licensed their fingerprint technology to phone providers in Japan as a way to authenticate mobile payments. Although virtual wallets have gained popularity overseas, the North American market has been slow to adopt this practice, predominantly due to security concerns.

Charlie Anderson, an analyst at Dougherty & Co, believes that fingerprint sensors will offer a much more secure alternative to password protection; after all, they cannot be stolen or copied using traditional methods. He said, "To have security behind it would give people peace of mind. It could be a major differentiator for them."

With several of AuthenTec's products licensed by Apple's rivals, analysts are wondering whether Apple will keep all of the patents to themselves. The general consensus is that Apple will continue to offer existing products to its competition as a way to gain regulatory approval. However, any new technology will probably remain exclusive to Apple's own product offering.

Midsize businesses should find this news very comforting. It seems as though BYOD will become a permanent fixture and any concerns over mobile security must be addressed beforehand. The danger with mobile payments is that an employee could misplace their phone and have it picked up by a seasoned criminal. After deciphering a short passcode, the thief would gain access to both employee and company bank accounts.

Fingerprint sensors will eliminate this issue entirely, and the technology could be easily transferred onto other mobile applications. For example, access to documents, email accounts, and even social media sites could be set up with fingerprint sensors in place. BGC Partners analyst Colin Gillis added, "If they could have a way where they could tie the phone to a user more tightly, that would make sense for them."

The only drawback of the Apple acquisition is that other tech companies might suffer as a result. Since HP, Dell, and Samsung all incorporate AuthenTec patents into their products, they will need to seek out another mobile security company for future developments. IT shouldn't be too worried about this just yet, unless Apple decides to prevent their rivals from using any of AuthenTec's products--even those that already exist.

Apple had been hesitant to adopt a mobile payment service in the past. They had their doubts about the security of Near Field Communications (NFC) and were willing to release the iPhone 5 without this coveted feature. Apple's acquisition of AuthenTec paints a vastly different picture. It demonstrates their confidence in fingerprint technology, and their belief that mobile payments are finally ready to enter the global marketplace.

This post was written as part of the IBM for Midsize Business program, which provides midsize businesses with the tools, expertise and solutions they need to become engines of a smarter planet. Like us on Facebook. Follow us on Twitter.

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