Apple, PayPal Enjoy Uncharted Mobile Payment Legal IssuesWritten by Mark Rasch
Attorney Mark D. Rasch is the former head of the U.S. Justice Department’s computer crime unit and today serves as Director of Cybersecurity and Privacy Consulting at CSC in Virginia.
Last month, Apple contained yet another patent for its iWallet payment system. As Apple tries to position itself as the ultimate payment processor, the competition is heating up for which entity, and which technology, will be responsible for ensuring that retailers get paid. Although these choices may ultimately prove useful for both consumers and retailers, they present new privacy challenges to all participants. As a result, Apple, PayPal and a host of other payment processors may find the need to hire new teams of lawyers to help them comply with the inevitable subpoenas and discovery requests that will befall them.
Lots of money can be made in helping retailers process payments and making it more convenient and easier for consumers to buy things. Apple’s iWallet technology, like many other existing or proposed technologies, is designed to enable consumers to make purchases both online and in brick-and-mortar stores quickly, easily and efficiently.
Under one possible configuration of the technology, a consumer selecting items at retail location would use an NFC-equipped cell phone linked to an iTunes account to purchase those items. The NFC device would communicate with the retailer, authenticate the user and validate purchase. The purchase would then be linked to the consumer’s iTunes account, the same account that person uses to buy music, video and Web applications. Because the iTunes account is linked to a store credit card, the actual financial transaction would be between the consumer’s linked credit card and the retailer.
So what’s in it for Apple? Certainly, Apple would charge either the retailer, the consumer or both a fee for processing the payment. Or, more accurately, it would charge for facilitating this process. But wait, there’s more.
An old saying (well, as old as anything can be on the Internet) says that if you are offered something for free and that thing is useful, then you are not the consumer, you are the product. What Apple gains in the transaction described is not only the transaction fee, a certain amount of brand loyalty and the ability to push even more consumers to its now NFC-enabled iPhones but perhaps the most comprehensive database of consumer activity, purchasing habits, location and other intimate personal information. Indeed, by cross-referencing and mining these data fields, Apple can know who you are, where you are, what you like, who you are with and pretty much what you were doing any time of day.
Apple will not only know what music you bought, but when you are listening to it and how often. Not just what videos you like, but how often you like them, where you are when you like them, who you are with when you like them and even when you decide to hit pause. It will know your size, height, weight, color preferences and style in shoes, hats, jeans, electronics and pretty much everything else. Not bad for a computer company. Thus, Apple will have a treasure trove of personal information.
This data aggregation function would be true of any company that collects information from multiple retailers. Thus, PayPal, Amazon, Google Wallet or any other company that acts as a third-party payment processor or payment facilitator will have a host of personal information at its disposal. Consumers’ privacy is protected, therefore, not only by the retailers privacy policies but by the privacy policies of these independent third parties. Once the retailer decides to accept payments through any of these technologies, it effectively loses control of the data.