One of the great things about the Internet and computer technologies is that they can empower consumers and businesses to do things that ordinarily require a middleman. Consumers can purchase their own insurance, engage in banking transactions, deposit checks, make purchases, etc. They can do this both online and in the brick and mortar environment.
But this means that when the technology fails, it is the consumer who must suffer the consequences, when ordinarily the risk of loss would have remained with the merchant.
For example, a few weeks ago I went with the family to a nice bistro, and sat outside. I got a parking space right across the street. My wife told me that she had quarters to pay the meter, but I said, "No problem, I can pay with my iPhone." I whipped out my device and invoked an app to pay for parking. I input the parking space number, the amount of time I wanted to park (an hour and a half seemed enough for dinner) and enabled the feature to send me an SMS message when the meter was about to expire.
After a pleasant dinner of pizza and chicken parmesan, I returned to find a ticket on the car. I checked the app, and it was blank. I logged into the app's website which showed that I had paid for parking—but had only paid for about two minutes.
I figured out what happened: After I paid for parking and enabled the SMS notification, I placed the phone in my pocket. By default, the app had a link to a command "Stop Parking." Putting the phone in my pocket invoked this command. When I pointed this out to the parking hearing officer, he was unpersuaded. You see, the meter wasn't broken. The app was poorly designed.
Similar results occur when an online banking app is hacked. While consumers may have no liability for the misuse of their credit and debit cards, online banking apps effectively put an ATM machine in the consumer's pocket. While ATMs are the property and responsibility of the bank, which are patrolled by and secured by the bank, the apps, smartphones and devices on which they sit (as well as the connections themselves) are not always the responsibility of the financial institution.
Thus, if a cyberthief hacks a business's computer, network or device, and through that gets into the company's bank account, the bank may have no liability. It is as if the bank installed an ATM at their customers' location and then said, "here — you take care of it."The same may be true for self-service POS terminals, including self-checkout, barcode-scanning apps and other remote payment options. A customer who attempts to use a self-scanner may face criminal charges for theft, shoplifting or worse if an item he tries to purchase doesn't scan properly.
This may be particularly egregious in places like Montgomery County, Md., which discourages the use of store-provided plastic bags by charging a nickel for each one. Thus, a consumer is likely to simply pick up an item, run it past the scanner, and place it into his or her backpack or purse. If the item doesn't properly scan, is the consumer then guilty of theft? After all, she put an unpaid item into her pocket or purse!
The problem is even worse when consumers provide the POS device themselves. Take for example Apple's (NASDAQ:AAPL) EZ-Pay application. It permits consumers to use their own devices—iPhone, iPad or iPod—to scan and pay for items in the Apple Store.
Now, consumers may or may not have the sophistication to do this properly. If a consumer does not properly scan and pay for an item, or if the device, hardware, software or connection does not work as intended, is the consumer then guilty of shoplifting?
I think not. By expecting the consumer to be both consumer and merchant, and to fulfill the merchant functions, we eliminate an essential check and balance, and a clear assignment of roles, responsibilities and liability. When we blend these roles we create an untenable situation.
But not everyone agrees, which is clearly demonstrated by the arrest and sentencing last year of an 18-year-old college student for shoplifting at a New York City Apple Store under exactly this situation.
The problem will get worse as we embed payment technologies into devices. If a consumer swipes a payment device at a subway turnstile, and the turnstile fails to debit (or the device fails to acknowledge the debit) the fare, is the consumer guilty of theft of services? If the device has been altered or hacked, is the consumer (absent proof that they hacked or were aware of the hack) liable for theft?
Technology always blurs lines. The law needs to keep up. Until then, we are all going to be expected to do not only our jobs, but the jobs of the bank, the insurance company, the Apple store, and the meter maid. If I am going to do that, I want a bigger paycheck.
If you disagree with me, I'll see you in court, buddy. If you agree with me, however, I would love to hear from you.