Pay-By-Phone: Smart, Convenient, And Inherently Unfair

How would you like to pay for your morning coffee: cash, credit, debit, or phone? In the near future, this may not seem like such an unusual question.

In fact, I'm willing to bet that instant pay-by-phone will become common in three years. And the way the tech is implemented could have a major impact on commerce in America?in a way that should make us all take pause.

Several competing systems have already emerged. Google Wallet and Isis use an embedded near-field communication (NFC) chip that is essentially a radio-frequency identification (RFID) antenna; PayPal and Pay with Square operate via an app that authenticates purchases in the cloud. All of the systems link your phone to your bank or credit card account and are used to authorize a transaction on the spot.

The technology raises some tough issues, the thorniest of which are fueled by the smartphone itself. The device has three qualities that, when combined, make it unlike any other transactional agent: It has a screen, it is location-aware, and it's connected to the Internet. Throw those ingredients into an ordinary purchase and things can get wacky. Consider pricing, for instance. What should a cup of coffee cost? Should the cost differ for a frequent customer and a new one, or at 8:30 am and 7:30 pm? What if two coffee shops could bid for your business? Each phone's screen could display a price based on the user's profile, location, and current inventory of the product for sale. Ultimately, pay-by-phone could render sticker prices meaningless and turn customers into commodities that retailers bid for with targeted discounts.

While it's true that services such as Groupon and LivingSocial have already established discount-based economies, smartphone transactions would add another dimension by making algorithmic haggling part of the buying process. A version of this already exists online. In June, the travel site Orbitz revealed that it automatically showcases more expensive booking options for Mac users than it does for PC users, based on research showing that Mac users on average spend $20 to $30 more a night on hotels than their PC counterparts. Orbitz customers can sort their booking options by price, so one could argue that there's nothing pernicious about the company's digital profiling of customers. But pay-by-phone could take this a step further. Your smartphone tracks where you go, handles much of your social networking, holds detailed information about your personal and business contacts, and logs whom you've communicated with and when. Now layer onto that a detailed transaction history and you've got the world's most sophisticated customer-targeting device.

Isis, which is backed by several cellular and credit card companies, plans to bundle loyalty cards, debit cards, and credit card accounts into a mobile-payment app. Manas Mohapatra, an attorney with the Federal Trade Commission's mobile technology unit, sees how this could benefit consumers by saving them money but also lead them to unwittingly release personal data. "If you subvert consumers' expectations, that's problematic," he says. "Are they being made aware when they're entering into a new transaction with a new entity? Are third parties that consumers think are ancillary to the transaction getting information?"

Technology itself is neither good nor bad, but the behavior it enables is open to debate. Mobile payment systems have the potential to create a profoundly undemocratic economy. Nobody said capitalism was fair, but if preferential pricing goes to those with the latest high-tech tools, the least fortunate citizens end up paying more for everything. And even those who can participate in smartphone commerce will be forever peeking at the screens of others, wondering who got a better deal.

Source: http://www.popularmechanics.com/technology/gadgets/news/pay-by-phone-smart-convenient-and-inherently-unfair-11000794?src=rss

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