Mobile Payment Apps and the Price of Convenience
Published by the Center for Digital Ethics & Policy
Wallets will be a relic of the past if the forces behind mobile payment apps have their way. Services like Apple Pay, Samsung Pay, Google Wallet, and seemingly countless others aim to nullify the need for physical credit and debit cards – the payment systems that made cash and checks obsolete just a couple of decades ago.
On the surface, paying for things with your phone seems convenient, but not absolutely necessary. It’s not really a hassle to pull out a credit card while waiting in line at the grocery store. But the smartphone already encompasses so many aspects of everyday life. Why not consolidate one more feature onto it?
Let’s walk through a hypothetical day: You’re out for a run in the morning, listening to music via headphones attached to the phone strapped to your bicep. You stop to purchase a cold water bottle at a convenience store. No need to store a card or cash in your waistband or tucked in your shoe. Tapping the phone against an electromagnetic reader at the register completes the purchase. Later, at work, you owe a coworker $20, but have no cash. But you don’t have to find an ATM during lunch: Instead, you send the money over Venmo, an app that’s hooked to your bank account. The colleague receives the payment instantly. That night, you buy your mom a birthday present from an online store. Instead of fishing out your credit card to type in its number, expiration date, and so on, you click one button that’s already hooked to your Google Wallet account. Done.
Acknowledging the potential convenience of mobile payments is relatively easy: They’re fast and they prevent you from having to carry around as much stuff. But there are ethical issues the industry needs to resolve before consumers will completely accept the concept, notably those related to accessibility and privacy: First, how easy is it to use these apps in the real world? Do they work anywhere, for anyone with any phone? Second, how do the companies behind these apps protect consumers’ private payment-related data? And how are they using that data for their own purposes?
Let’s focus on a major player in the mobile payments sphere, Google Wallet. The digital wallet app holds not only a person’s credit and debit card information, but also gift and loyalty cards. It can also be used to make purchases at online stores partnered with Google or to send money peer-to-peer. People make purchases in stores using near field communication, or NFC, a technology that uses electromagnetic induction to let a device communicate or exchange data with another device.
Some background: The Google Wallet FAQ page says that the app works “anywhere MasterCard PayPass is accepted,” which includes “millions of merchant locations in the United States.” Searching MasterCard’s locator for grocery stores within one Chicago Zip code reveals 42 locations that accept this payment method, including chains and independent mom-and-pops, but not every chain or mom-and-pop grocery store. A user would want to be familiar with the locations that accept the service and those that don’t, or else, carry around backup payment options – but there goes some of the convenience factor.
So Google Wallet does not work everywhere. But a bigger issue is that it doesn’t work for everyone. In fact, to use the app in stores users must have NFC-enabled Android phones – not the cheap ones or the older models. Consider CNET’s list of the best Android phones of 2015. The top-rated, NFC-capable Galaxy Note 4 retails for about $700. The “best budget” Android, the Motorola Moto G, costs about $200, but does not have NFC. To enjoy the benefits of Google Wallet, people must be both willing and able to buy an expensive phone that has the required technology.
If apps truly become the preferred mode for payment, those who won’t or can’t invest in pricier phones may be at a disadvantage – even locked out of certain stores if apps become not just the preferred option, but the only option they accept for purchases. Or, less drastic, maybe a shop offers special discounts to customers who use a payment app. Is it fair to link something as ubiquitous as shopping to a technology that is not attainable to all?
These scenarios are not likely to become realities anytime soon. In a 2014 Deloitte survey, just 7 percent of consumers in the United States said they had used their smartphone to make an in-store payment. About half of the respondents said that they didn’t even know if their phone had NFC capabilities. Another survey, conducted by MEF, a global trade association focused on mobile commerce, reported that 79 percent of U.S. respondents were not comfortable sharing their personal information over an app and 35 percent said they don’t believe mobile payment systems are secure.
Despite these concerns, the security features of payment apps may actually be their primary perk. When paying with Google Wallet, a consumer’s stored credit and debit card data is not passed on to the merchant. This is a significant plus as cyberattacks that compromise customer accounts become more common. Google Wallet also provides fraud protection, lets users lock the app with a security PIN, and allows people to remotely disable the app should a phone be lost or stolen.
Consumers can rest assured that their personal information is probably safe from hackers and thieves. It’s not, however, safe from Google’s grasp. It’s well known that the company has the ability to monitor surfers’ online behavior – site visits, locations, and so on. With Google Wallet, it has access to arguably some of the most personal of personal data: your finances.
Another mobile payment app, Apple Pay, has many of the same pros and cons as Google Wallet.
It requires NFC technology, which works only on the iPhone 6 and iPhone 6 Plus ($649 and $749 without a contract). But it also provides security benefits that supersede other traditional payment methods. Apple Pay even has a security feature that Google does not: A fingerprint identification sensor called Touch ID.
Ultimately, most people won’t make a conscious decision to choose Google Wallet over Apple Pay. Instead, it will come down to the phone and carrier they already have. Those who use neither Google nor Apple will soon have another option: In February, Samsung acquired LoopPay, which allows the smartphone maker to launch its own mobile payment system, one that also features a fingerprint reader. Samsung Pay will use a different kind of technology, known as Magnetic Secure Transmission, which lets digital wallets scan the magnetic stripe readers already on credit terminals.
All of this competition in the mobile payment sphere may be confusing for consumers, many of whom have not ever used one of these apps. But the competition among Apple, Google, Samsung, and many others is actually making mobile payment apps more secure as each company tries to one up the other in an area they believe is here to stay.
Is it inevitable that consumers will eventually embrace it, too? People already use their phones to send highly compromisingselfies, to write sensitive business emails, and to bank online. Uploading all your credit card and checking account information to Google or Apple accounts doesn’t seem so dangerous in that light. Indeed, mobile payment transaction values doubled between 2012 and 2013, according to a report by eMarketer. It’s already a multibillion-dollar industry despite hesitance from some consumers and stores.
Last fall, CVS made headlines when it turned off NFC readers in its credit card terminals, disabling the ability for customers to use Apple Pay and other mobile payment apps at its stores. Instead, CVS joined a consortium of some 40 merchants led by Walmart called Merchant Customer Exchange to develop their own mobile payment app, CurrentC. While the service is accessible to anyone with a smartphone, it has its own set of issues.
For starters, CurrentC is hooked up to consumers’ bank accounts, not their credit cards, in order to allow companies to sidestep the 2 to 3 percent credit card processing fee that they have to pay, say, Visa and MasterCard when customers use those forms of payment. But will Walmart and CVS pass those savings onto their shoppers or minimum-wage employees?
Another problem for consumers is that these stores feature CurrentC exclusively, a move that seems self-serving. Walt Mossberg, of tech news site Re/code, summed it up by writing: “I simply believe that people who respect their customers and have faith in their own technology products should welcome competition, and that consumer choice should be a paramount value in retailing.” Customers seem to agree: Reviews in Apple’s App Store and in Google Play give the CurrentC app an average one star rating out of five, noting faulty security features and cumbersome usability.
It’s reasonable that other companies would want to enter the mobile payment app game – why should the big names win the whole market? Right now, they don’t. There are many other relatively well-known mobile payment apps, including PayPal, Venmo, LevelUp, Square, and store-specific ones like the Starbucks App, plus many less prevalent options. But even with all these choices, it’s not yet easy to forgo cash and plastic completely.
While mobile payment apps may be safer than using credit cards, ethical issues remain. They may perpetuate a dichotomy between those who can afford compatible phones, and those who can’t. The apps also carry the same privacy concerns that all digital products do: They enable companies to track deeply personal information. The details of how they are using this data now, and how they will use it later as the technology evolves, are unsettlingly unclear.
And even if every logistic and ethical issue is eventually reconciled, a smartphone can still break or run out of battery.