Your Credit and Debit Cards Are About to Change – Here’s Why

Hand passing a payment card (N.B. Mocked up details*)

The plastic we carry in our wallets will be quite different in the near future. The big change is seemingly innocuous — a microchip embedded right above the first series of numbers on the card.

But that small metal stamp is the foundation of a system that promises more robust security for all parties involved in a transaction. Chip cards have been the norm for years in other countries, but they’re only now starting to see full-scale rollout here in the U.S. And it’s about time, too.

Old Technology in a New World

The traditional credit and debit card in this country packs its data onto the magnetic strip on the back of the plastic — an innovation that dates from the 1970s.

This isn’t particularly secure, since criminals need only possess the card and approximate the holder’s signature when making a purchase. Also, with the right equipment, it isn’t difficult to “skim,” or copy, that data directly from the stripe.

As a result, America is a haven of card fraud. According to statistics compiled by The Economist, in 2012 total losses from the activity worldwide amounted to over $11 billion. The U.S. was responsible for nearly half of that figure.

In contrast, a card embedded with an EMV chip — “EMV” stands for the members of the consortium that came up with the standard: EuroPay, MasterCard (MA) and Visa (V) — encodes the card’s information.

In most of the world, chip cards feature an important extra wall of security — a PIN number. This must be input by the cardholder in order to complete the transaction.

This “chip-and-PIN” setup is clearly more secure … at least for “card present” (face-to-face transactions where the customer presents the plastic) interactions. According to research by the Federal Reserve Bank of Atlanta, in the first year (2004) of large-scale chip-and-pin implementation in the U.K., total fraud losses stood at 505 million pounds ($767 million). By 2010, that number had dropped by nearly 30 percent to 365 million pounds ($556 million).

The difference would be more dramatic if it weren’t for “card not present” transactions, such as the ones made by phone or online rather than face-to-face — after all, without a PIN reader, it’s not possible to use the PIN for verification (solutions are being developed, but none have yet found widespread adaptation). Fraud losses for CNP transactions actually rose over the same period, to 227 million ($352 million) in 2010 from 151 million pounds ($234 million) six years earlier.

Nevertheless, the big credit card companies — Visa, MasterCard, Discover Financial Services (DFS) American Express (AXP) — have set a date of Oct. 1 for merchants to implement the technology that can process chip card payments.

After that, according to the terms of their respective merchant agreements, the costs of compensating for fraudulent card-present transactions will be paid by the party least compliant with EMV transaction standards — in other words, the merchant who hasn’t properly upgraded its system to handle the new cards.

PINned to an Upgrade

Although certain nationwide retailers such as Wal-Mart (WMT) have upgraded their systems to take chip card payments in their stores, many smaller enterprises have yet to do so. This, of course, is a matter of resources. A smaller store or chain of stores might not have the capital to buy and install the necessary equipment..

Compounding this, some merchants have complained about delays in obtaining chip card readers due to backlogs from manufacturers. Apparently, the latter can’t make a sufficient number of the machines quickly enough.

The credit card giants probably took this at least some of this into account; the full implementation is going to be slow and gradual. The chip cards the major issuers have been sending out still have that old-fashioned magnetic strip on the back of the card, in addition to the chip. So they’ll still work in terminals not equipped to handle chip transactions.

Even at the points of sale that can crunch chip purchases, a PIN will not (yet) be required — like chip technology to begin with, adding PIN verification requires extra technology in place to process the transaction. Instead, the cards being made and sent out these days are “chip-and-signature” products, requiring only an autograph from the cardholder for user authentication… exactly like those vulnerable strip-only cards.

Your Card Is in the Mail

Many card issuers are already well into the chip era. Bank of America (BAC), for one, has had the metal square on several of its card products for some time now. American Express began sending out its chip cards in 2013.

All told, around 575 million chip debit and credit cards are expected to be in the possession of cardholders by the end of this year. For cardholders, this transition will be automatic and largely painless: Issuers will replace expiring magnetic-strip-only cards with chip cards.

According to a recent article in The Wall Street Journal, by the end of this year around 75 percent of credit and 40 percent of debit cards should be chip cards.

Although these products will eventually be more secure than mag-stripe-only ones after full chip-and-PIN technology is implemented, as a card owner, you should always remain vigilant and continue to check your card activity on a regular basis. If any unauthorized charges have been made, contact the card’s issuer right away.

It’s early days yet, and there will certainly be hiccups on the way to America getting up-to-date on payment card technology. But it’s the right direction to move in, and every key party involved in credit card commerce — issuer, network operator, merchant and cardholder — ultimately stands to benefit from a safer system.

Don’t Be Surprised if Starbucks and Spotify Fall Out of Tune

Spotify Chief Content Officer Ken Parks News Conference

Starbucks (SBUX) turned heads earlier this month, striking a deal with streaming-music darling Spotify. The partnership will allow Spotify’s premium subscribers to earn reward points that can be redeemed at the leading premium coffee chain.

It’s a pairing that makes sense in theory. Spotify has more than 60 million active subscribers worldwide, with more than 15 million of them on board as paying members. If Spotify is paying for the right to issue Stars — the points issued in the My Starbucks Rewards program — as a tool for attraction and retention, it could be a win-win move.

However, then we get to an interesting wrinkle in this partnership. Spotify users will be able to suggest songs from Spotify to include in the music playlist of their preferred Starbucks store. That seems pretty inspiring, until you begin to wonder if walking into a store will result in the awkward aural transition of going from Skrillex to Kanye West to Florida Georgia Line between sips of your Caramel Brulee Frappuccino.

Sure, that will never happen. Starbucks is trying to cultivate a specific premium user experience, and sonically speaking, that involves a steady flow of smooth indie tunes. However, if your favorite store ignores your Spotify suggestions — and that’s what will probably happen, as the Top 50 playlist on Spotify is far removed from the hipster sets that currently play at Starbucks — it will lead to disillusioned customers who were duped into thinking that they actually had control of the jukebox.

Once again, Starbucks will get it wrong when it comes to music.

The Long Divide Between Java and Jams

Starbucks has always wanted to be a tastemaker in the world of music. Walking into a store opens up access to its Pick of the Week, which is available as a free iTunes download. Starbucks used to hand out promo codes for the iTunes downloads until it improved its in-store Wi-Fi.

Starbucks has even put out its own musical releases. Did you know that it was Starbucks that released Paul McCartney’s “Memory Almost Full” CD in 2007? It was the initial release on the Hear Music label that the coffee giant launched that year — and if the “Hear Music” moniker sounds familiar, it’s because it was also the name of the coffee-centric music store that Starbucks tried to roll out a few years earlier.

Hear Music was a chain of five CD stores that Starbucks acquired in 1999. It went on to open three more flagship stores, incorporating the signature premium brews of Starbucks into a dynamic music environment with listening stations and music sales. It never truly took off. CD sales were peaking. However, this has never stopped Starbucks from trying to score the soundtrack of its customers.

Sometimes it works. Starbucks earned props for unearthing early recordings of Ray Charles and Bob Dylan, and countless music icons got an early boost from iTunes promo codes at its stores. However, there are also lines that shouldn’t be crossed. Giving Spotify listeners the ability to earn reward points that can be exchanged for steaming beverages at Starbucks makes sense, but pretending that it’s going to let customers play DJ for individual stores is never going to fly.

Get Ready for ‘Buy’ Buttons on Google Searches

Google Stock Split Settlement

Google (GOOG) is apparently gearing up to populate product searches made on mobile devices with “buy” buttons. The Wall Street Journal reported this month that the new graphical buttons would be available to advertisers, helping them stand out even more on Google’s popular search engine.

This would be a controversial move if consumers weren’t already inundated with “buy” buttons on leading e-commerce sites including Amazon.com (AMZN) and eBay (EBAY). Google going this route, particularly on smartphones and tablets, where advertisers have been reluctant to pay as much as they do to reach Google users on PCs, makes a lot of sense.

Consumers will just have to be smart enough to realize that the new buttons are a monetization tool for Google, and limiting its use to existing sponsors will mean that there might still be cheaper ways to buy these particular products.

You’ve Come a Long Way, ‘Buy’ Button

Google isn’t the first non-e-tailer to go this route. Twitter (TWTR) began testing similar buttons last year, giving advertisers more bang for their marketing buck.

Introducing the feature to consumers on mobile devices makes sense. It’s an area where Google usage is growing at a faster clip than traditional access through desktops and laptops, but the rates that the global search engine leader is commanding are lower than on PCs. The disparity between what advertisers are willing to pay for PC users versus mobile users is explained by the fear that folks on smaller screens aren’t as likely to complete transactions as they are on larger computers. A big reason that cost-per-click at Google and other search engines has been declining is that advertisers are paying less for leads generated through smartphones and tablets.

We saw the number of leads generated by Google climb 13 percent over the past year during the first quarter, but the aggregate cost per click declined 7 percent as most of Google’s growth came from access on smaller wireless devices.

The “buy” button can help. It’s probably not a coincidence that eBay, Amazon, and most e-commerce sites incorporate action buttons. It also could only help if Google’s product pages with the new buttons lead to checkout platforms with existing payment information already entered. It would make it that much more conducive to finalizing a transaction.

Push the Button

The “buy” button could be just the beginning, of course. If the e-commerce wrinkle is successful, why wouldn’t Google turn to an “get more info” button that would automatically send relevant information by email to the user? There could also be a “save” button to square things away for future consideration.

Growth is slowing at Google. Analysts see earnings per share and revenue climbing in the pre-teens this year. The monetization challenge has been eating at margins, and Google has missed Wall Street’s quarterly profit targets for more than a year.

As long as consumers don’t react negatively to the “buy” button — and they shouldn’t since it will appear in search engine results that are already clearly labeled as sponsored entries — Google could be on to something here.

Ford Recalls Nearly 423,000 Cars for Power Steering Problem

Ford Investigation

Under pressure from U.S. safety regulators, Ford is recalling nearly 423,000 cars and SUVs in North America because the power-assisted steering can fail while they’re being driven.

The recall covers certain Ford Flex and Taurus vehicles, as well as the Lincoln MKS and MKT from the 2011 through 2013 model years. Also covered are the Ford Fusion and Lincoln MKZ from 2011 through 2012 and some 2011 Mercury Milans.

Ford says an intermittent electrical connection can cause the power steering to stop. That sends the steering into manual mode, making the vehicles harder to control. The company says it knows of four crashes due to the problem but no injuries.

Dealers will either update power steering control software or replace the steering gear depending on the problem with individual vehicles. A new steering gear eliminates the electrical issue.

In October, the National Highway Traffic Safety Administration began investigating complaints of power-steering failures on three Ford Motor Co. (F) midsize car models. The probe covered 938,000 Ford Fusion and Lincoln MKZ cars from the 2010 through 2012 model years, as well as the 2010 and 2011 Mercury Milan.

According to a class-action lawsuit filed in June about the matter, the problem could affect more Ford models, including the compact Focus.

NHTSA said at the time that it received 508 complaints alleging that the cars lost power-assisted steering, causing increased steering effort.

Ford said it was unsure if the agency would close its investigation because of the recall. A message was left Wednesday for a NHTSA spokeswoman.

The company also is recalling 19,500 2015 Mustangs with 2.3-Liter engines due to high underbody temperatures that could degrade the fuel tank and fuel vapor lines, increasing the risk of a fire. No fires have been reported. The heat also can damage the parking brake cable. Dealers will replace a heat shield and add insulation.

This Couple is Set to Retire at 40

Couple walking at beach smiling

Retiring at 40 seems like an impossible dream. Just making it to the golden years by 65 is challenging enough. Yet, there are a growing number of early retirees who have managed to call it quits in their 30s and 40s.

So it is with Chris, who goes by the name of “Elephant Eater” on his blog,EatTheFinancialElephant.com. The motto of the blog is “Working toward financial independence and early retirement — one bite at a time.” That motto should give you a solid idea of what it is he writes about.

I had an opportunity to interview Chris on the topic of his journey to early retirement at age 40. He provided fascinating insight into the nuts and bolts of extreme early retirement. While Chris is 38 and his wife is 37, they are just a couple of years away from making retirement at 40 a reality. Still, when it comes to money, they are light years ahead of their peers.

How are they doing it — especially with a two-year-old daughter?

Live Beneath Your Means

According to Chris, the “secret” to their success has been not just living beneath their means, but well beneath. Since graduating from college in 2001, they have lived off of one paycheck and banking the other.

The one paycheck strategy started when Chris’s wife graduated from college. They lived off of her salary of $36,000 while Chris finished his last year in graduate school. When Chris began working and earning a similar paycheck, they continued living on his wife’s income. They dedicated his paycheck to paying off her car loan and student loan.

There’s no magic here. Chris and his wife lived off of her income while dedicating his paycheck to improving their finances. This strategy enabled them to devote an entire income to paying off debt and saving money. They’ve continued to operate in that mode since 2001, which explains why they are nearing retirement.

Ignore the Consumption Trends Around You

For Chris and his wife, living on one paycheck and banking the other became a lifestyle. But it wasn’t one that was without the typical distractions. While they were paying off debt and saving money, many of their friends were busy improving their standard of living. Most bought new cars, and some traded up to larger houses. It was a trend that Chris and his wife resisted.

They bought a small house in 2003. Rather than trading up to a new and larger home, they paid off the mortgage in seven years. They still live in the same home today.

They followed the same pattern with their cars. Instead of buying new, they bought older, used cars — for cash — then drove them until the car died. Until three years ago, Chris drove an older Chevy Malibu for eight or nine years while his wife drove the same car she had in college. We’re talking about driving cars that were well over 10 years old. That’s not something that many couples do these days.

But it’s that willingness to live well beneath their means that has enabled Chris and his wife to live on a single paycheck. And while some might call it a sacrifice, it’s led to several benefits. For one, there’s the rapidly growing savings account, which is fed monthly by the extra income they earn. Meanwhile, they’ve also been able to take some exotic trips. For example, they have traveled to Africa, Australia, Ecuador and all over the United States.

Save As If Your Life Depends On It — And One Day it Will

“Saving as if your life depends on it” is the cornerstone of the early retirement concept Chris and his wife embraced early in their marriage. While most couples save 10, 15 or as much as 20 percent of their income, Chris and his wife have been saving 50 percent. When you can save that much money, the whole idea of early retirement becomes much more likely.

Since Chris and his wife earn approximately the same income and save one paycheck, their average savings rate sits around 50 percent. That isn’t a static number. Some years they’ve managed to save “only” 40 percent, while in others it’s been at 60 or even 70 percent. With a combined income now in the $170,000 to $180,000 range, that’s a lot of savings.

Saving 50 percent has two related benefits. First, and most obvious, is that it has enabled Chris and his wife to save mountains of cash. Second, and just as important, it keeps their spending requirements in check. Since they live off of 50 percent of their gross pay, they don’t require as much capital to retire. To see this dynamic in action, check out this Financial Freedom Calculator.

Adopt a Zero-Tolerance Attitude Toward Debt

Part of what has enabled Chris and his wife to save such a large percentage of their income is their complete aversion to debt. As noted earlier, they paid off their mortgage in seven years and eschewed car payments in favor of older, paid-off models. Since debt is often a savings-killer, Chris and his wife committed to avoiding it like the plague early on, with a few exceptions. For example, they took on debt to buy their home, but paid it off quickly.

After some time, Chris and his wife found that a debt-free lifestyle also came with its own set of benefits. With no debt and plenty of cash on hand, they felt far less pressure to get the things that debt typically buys. They found themselves content to lead a modest life, to control their cash flow, and to travel. They found that their frugality and high savings rate could buy freedom, and they relished in the purchase.

Recognize that Mistakes Aren’t the End of the Line

Interestingly, Chris concedes that he and his wife have made some mistakes along the way. For example, in the early 2000’s, they were busy paying off their mortgage. While that has been a huge boon for them, the “return” they earned for prepayment was only equal to the interest rate on their mortgage. According to Chris, they could have done much better by investing in stocks and in real estate.

But that wasn’t their only “mistake.” Three years ago, when his wife became pregnant, they gave into peer pressure and purchased two brand-new automobiles. The prospect of having a child made them believe that they had to default to more common aspirations.

Meanwhile, they’ve also had issues on the investment front. They’ve hired and fired some investment managers, some of whom did a poor job of managing their money. Though adept at living beneath their means, avoiding debt, and saving, they weren’t skilled investors.

The saving grace is that Chris and his wife are doing the big things right. They are living beneath their means, they are staying out of debt, and they are saving 50 percent of their income. Those are each financial fundamentals. When you get those right, you can afford to make a few mistakes without having your plans completely crushed.

Early retirement is possible, but you have to master the basics of good money management. While many people focus their energy on finding the right investments, lowering investment fees, and getting the best rates on mortgages and credit cards, none of those efforts match the benefits of saving 50 percent of your income.

If you get the basics right, retiring early can become much less of a dream and much more of a reality. And as Chris’ story goes to show, you don’t have to do everything perfect either.

Russia warns Google, Twitter and Facebook on law violations

google_hat_ap.jpg
Russia’s media watchdog has written to Google, Twitter and Facebook warning them against violating Russian Internet laws and a spokesman said on Thursday they risk being blocked if they do not comply with the rules.Roskomnadzor said it had sent letters this week to the three U.S.-based Internet firms asking them to comply with Internet laws which critics of President Vladimir Putin have decried as censorship.

“In our letters we regularly remind (companies) of the consequences of violating the legislation,” said Roskomnadzor spokesman Vadim Ampelonsky.

He added that, because of the encryption technology used by the three firms, Russia had no way of blocking specific websites and so could only bring down particular content it deemed in violation of law by blocking access to their whole services.

To comply with the law, the three firms must hand over data on Russian bloggers with more than 3,000 readers per day, and take down websites that Roskomnadzor sees as containing calls for “unsanctioned protests and unrest”, Ampelonsky said.

Putin, a former KGB spy, once described the Internet as a project of the CIA, highlighting deep distrust between Moscow and Washington, whose ties are now badly strained.

He promised late last year not to put the Internet under full government control, but Kremlin critics see the Internet laws as part of a crackdown on freedom of speech since Putin returned to the Kremlin for a third term in 2012.

A law passed last year gives Russian prosecutors the right to block without a court decision websites with information about protests that have not been sanctioned by authorities.

Under other legislation, bloggers with large followings must go through an official registration procedure and have their identities confirmed by a government agency.

Facebook says it responds to government data requests about its users that comply with company policies and local laws and meet international standards of legal process.

A company website that publishes statistics on how Facebook handles data requests shows it rejected both of two Russian government requests for information on its users last year. In contrast, it produced some data in response to nearly 80 percent of over 14,000 requests made by U.S. courts, police and government agencies in the second six months of 2014.

Twitter had a similar response rate in the United States but rejected 108 Russian government requests in the second half of last year, according to data on the company’s government Transparency Report site.

In its semi-annual Transparency Report, Google said it provided some information on users in response to 5 percent of 134 Russian government requests made in the second half of 2014 — again far less than in the United States. The company says it complies with requests that follow accepted legal procedures and Google policies.

“We realise they are registered under U.S. jurisdiction. But I think in this case they should demonstrate equal respect to national legislation,” Ampelonsky said.

If the companies do not pay more attention to Russian government requests for data, he added, “we will need to apply sanctions”.

Major Tourist Spots to Get Free Wi-Fi Facility Soon

mobile_user_at_mwc_afp.jpg
The government would soon provide Wi-Fi facilities at all major tourist spots across India, Information Technology Minister Ravi Shankar Prasad said in New Delhi on Thursday.”Taj Mahal, Sarnath, Bodh Gaya are some of the places that will get a Wi-Fi facility soon. We have already started providing free Wi-Fi service at Varanasi ghats. The government has also started the facility of providing e-visa to tourists,” Prasad said New Delhi at the ‘Manthan conclave’ organised by Aaj Tak.

He said his ministry has formulated a new policy to make tier II and III cities as IT hubs.

“We are setting up call centres and BPOs at small towns and creating 48,000 jobs in the first phase. We will give subsidy to take IT revolution to smaller towns,” he added.

“E-commerce is a big opportunity and we are roping in the Department of Posts to deliver goods to small towns and villages. Postal department has become a reliable partner for big e-commerce companies to deliver their goods,” the minister added.

Talking about the Modi government’s focus on digital India that aims to bridge the gap between haves and have-nots by using telecom and IT as a tool, Prasad said India would soon have 100 crore mobile subscribers, while within two years Internet connections would grow from 30 crores to 50 crores.

“We are connecting 250,000 village panchayats with broadband and opening common service centres at remote locations to provide services and government facilities at the doorsteps of citizens,” Prasad said.

Narendra Modi ‘Scores Big Hit’ With Weibo Account, Says Chinese State Media

modi_weibo.jpg
China’s official media on Tuesday welcomed Prime Minister Narendra Modi’s initiative to open an account on the popular Chinese social micro-blog Weibo, saying he scored a “big hit” ahead of his visit to China next week.”Modi scores big hit with micro blog in run-up to visit,” read the headline in the state-run English language China Daily, while another official newspaper Global Times headline says ‘Modi debuts on Weibo ahead of state visit to China’.

The China Daily said Modi’s account on the Sina Weibo, akin to Twitter and Facebook, “attracted thousands of Internet users”.

Modi, who is scheduled to start his three-day visit to China from May 14, posted his first post in Chinese, saying “Hello China! Looking forward to interacting with Chinese friends through Weibo.”

His post was immediately forwarded more than 4,700 times and attracted over 7,800 comments within three hours, it said.

Some welcomed Modi’s “positive gesture”, while many others raised issues that have posed obstacles to ties between the two countries for decades, it said.

One post read: “I suggest improving the social status of Indian women and protecting the safety of females! Or we foreign women will not dare travel to India.” The post attracted more than 700 “likes”, the report said.

It is not the first time that a foreign leader has opened a micro-blog account before making an official trip to China.

In September 2013, Venezuela’s President Nicolas Maduro opened a micro-blog account before visiting China, it said.

Over 200 leaders of foreign countries and international organisations, including British Prime Minister David Cameron, had opened micro-blog accounts as of April last year, it said.

It quoted Le Yucheng, the Chinese ambassador to India, as saying that Modi will have the chance to communicate with China’s business people, young students and the public during his visit.

The Global Times said Modi has been welcomed by Chinese Internet users with his first post, getting more than 14,217 hits and 26,406 followers as of press time.

More than 10,000 internet users commented on his first post as of press time, it said.

“Aside from expressing curiosity on who runs this account for Modi, some Net users made references to territorial disputes between the two countries,” it said.

Apple Pressuring Music Labels to Ditch Spotify’s Freemium Model

beats_apple_reuters.jpg
Apple’s much-anticipated Beats music streaming service is said to be only weeks away from launch. However, reports have now surfaced that the Cupertino-based giant has been using its considerable clout in the music industry to make labels force Spotify and other competing streaming services to discontinue their ‘freemium’ service models. This would dramatically reduce competition for Apple’s service, since a vast majority of streaming users are on the freemium tier. It is expected that most of these users would switch over to the Beats service if forced to pay.According to a report by The Verge, the United States Department of Justice and Federal Trade Commission are investigating these allegations and Apple’s business practices ahead of the launch of the service. DoJ officials have already interviewed top music industry executives in relation to this matter, while the FTC is expected to take the lead in the investigations going forward. Apart from the US DoJ and FTC, the European Union Competition Commission is also investigation similar allegations.

The prime targets of Apple’s actions are Spotify and YouTube, which both offer users a freemium option to stream music. The user pays nothing for the service, but is instead pushed advertising which generates revenue for the services. Apple has been using its influence to force labels to not renew Spotify’s licenses to stream music on its free tier, and has even reportedly offered to pay Universal Music Group an amount equivalent to YouTube’s music licensing fee. The Verge report quotes a source in the music industry to say “All the way up to Tim Cook, these guys are cutthroat.”

The report points out that Spotify has a total of 60 million users, of which only 15 million are paying subscribers. If this large chunk is forced away from the free service, it is likely to opt for Apple’s Beats service.

Apple must definitely be working on securing a large amount of exclusive content for its streaming service, and the removal of competition may drive a lot of users its way. However, such practices are against the principles of healthy competition, and are monopolistic in nature. Furthermore, the elimination of the freemium model is against the interests of a vast majority of consumers.

This news comes shortly after the closure of Grooveshark, an early pioneer in the streaming industry that was forced to shut shop after running into legal trouble. If corrective measures are not taken, this could indicate the start of a massive shake-up in the rapidly growing streaming industry that could affect users negatively.

Internet.org Traffic to be Unencrypted; Privacy and Security Take Backseat

internetorg_fb_proxy_facebook.jpg
New information has come to light about Facebook’s Internet.org initiative following the company’s announcement of an open platform for Web develpers. Internet.org, which gives users the ability to use specific approved Web services without incurring cellular data charges, will impose a number of restrictions on what exactly developers will be allowed to do, and Facebook will retain the power to approve and reject services. Most notably, SSL/TLS/HTTPS encryption, which is the backbone of Internet security, is explicitly disallowed at present.

Internet.org functions by passing all traffic through a proxy service, which the company says allows it to “create a standard traffic flow so that operators can properly identify and zero rate” traffic. HTTPS traffic cannot be detected and routed this way. This means unencrypted traffic will pass through Facebook-controlled servers, raising potential privacy and security concerns.

As first spotted by Medianama, the terms and conditions listed by Facebook for developers who want to participate in the platform specify that traffic will be subject to Facebook’s data retention policies. The terms and conditions that users and developers must agree to also allow the company to analyse usage and even share that information with mobile operators. The Verge points out that banking, private messaging and other applications that depend on encryption would have to steer clear of Internet.org.

Additionally, anything that pushes bandwidth requirements, including video and downloadable files, will be rejected. Photos must be low-resolution and not larger than 1MB. JavaScript, Flash and Java applets, iframes and certain file types are also disallowed.

Facebook’s technical documentation states that support for SSL/TLS will be implemented within an Android app, and that the company is “investigating ways that we could provide the same security for web-based access to Internet.org”. Content that requires encryption will not be available through Internet.org till then.

Net neutrality concerns remain, as developers and content providers would be forced to sign on in order not to lose customers. Medianama also raises the issue of Facebook becoming more powerful as the source of all content that users see, since there will effectively be a penalty in moving from the Internet.org ecosystem to the open Web.

In February this year, Facebook announced the launch of Internet.org in India as a partnership with Reliance Communications. The move was met by swift negative reactions over its potential to fracture the Internet by creating a pool of preferred websites and services which would not cost users money to access, giving them a massive advantage over competitors. The backlash caused partners to withdraw on principle. Facebook has since denied that Internet.org is a threat to net neutrality.