Does one really think that a stranger sitting even 1.5 meters away (like in a train) would be able to recognize the password one is typing into the app or mobile website? Test it yourself. I cannot.
One of the basic usability principles is visualising system status and giving feedback. Masking a password while it is typed does not comply with either of the former. People feel less confident. The less confident they feel the more likely they are to e.g. simply copy+paste. So you are basically making it less secure than you had intended at the outset.