Mobile Payments, Location Tracking and Consumer Privacy

Mobile Payments, Location Tracking and Consumer Privacy

The ability to track consumers’ location is at the core of many of the high profile mobile payments systems that are now vying for our attention. For example, Google’s interest in designing its digital wallet lies in large part in the system’s ability to collect information about its users’ purchases, which can then be coupled with the geolocation data received from the consumers’ phones and then participating merchants would be given access to the data. The merchant could use the data to produce custom-made offers that could be sent to consumers just as they are passing by their store.

But how will consumers respond to the possibility of having their movements and shopping behavior tracked and their contact information shared among various commercial entities? Furthermore, how do current laws treat such practices? Well, a recent paper by three researchers from the University of California, Berkeley is shedding some light on these issues and I thought I’d share its findings with you.

The Legality of Information Sharing

As the paper notes, sharing information about consumers’ shopping behavior could easily lead to an increase in the volume of unsolicited telemarketing messages and spam that we receive. Moreover, we could start getting spammed by text messages, in addition to email. Yes, presumably these would be offers tailor-made to match our shopping behavior, but would they be illegal if they were unsolicited? Well, probably not, according to the UC, Berkeley researchers:

Most anti-marketing laws have “established business relationship” exceptions, allowing the merchant to call a customer even if that person is on the Telemarketing Do-Not-Call Registry. An established business relationship generally does not require a sale — it can be created if a consumer merely makes an inquiry at a merchant.10

Many merchants have not taken advantage of this exception for most consumers because they cannot prove that a business relationship exists with a specific person. If merchants are incorrect and start sales calls to a consumer, they can be sued for significant damages under the Telephone Consumer Protection Act.11 Thus, merchants need to ensure that they both have a business relationship, and are contacting the right consumer.

The richer data provided to the merchant in some versions of mobile payment systems could change this dynamic entirely. If mobile payment systems transfer contact information to the merchant, then the general exception for “established business relationships” will be triggered, and the merchant is more likely to start sales calls or emails.

So the new technologies would make it easier for merchants to send unsolicited communications to their customers, even as more consumer information than ever before is shared among various commercial entities:

Under existing privacy rules, these entities could share this information with third parties — for example, advertisers — without the affirmative consent of the consumer. They could also use it for their own marketing, research, or other purposes. For instance, social network services with payment systems could add transaction histories to their already rich databases of behavioral information.

There it is. What we used to regard as private information would be freely shareable in the new brave world of mobile payments. But what do consumers think about such prospects?

Would You Allow Merchants to Track Your Location?

There are various systems capable of tracking a consumer through the signals emitted by her phone, whenever the phone’s Wi-Fi is enabled, without the need for any additional applications to be installed. When these signals are combined with other data, consumers could be identified, and their behavior monitored, through their phones. The only way to prevent yourself from being tracked would be to disable your Wi-Fi or turn off your phone altogether.

The researchers have conducted a survey to gauge consumer sentiment toward these possibilities and here is what people have told them:


Definitely allow

Probably allow

Probably not allow

Definitely not allow

Would you allow your phones to share information with stores when you visit and browse without making a purchase?





Would you allow the sharing of your telephone number with a store where you purchase goods?





Would you allow the sharing of your home address with a store where you purchase goods?





Would you allow the sharing of your email address with a store where you purchase goods?





So consumers are strongly opposed to the sharing of any of their personal information. Even the least sensitive piece of data – email address – garners opposition from two-thirds of the respondents.

The Takeaway

Given the results of this survey, I can’t wait to see the real-world consumer reaction to Google Wallet, Isis and the other mobile wallets when they grow beyond the early-adopter stage. My sense is that there will be plenty of consumers who will actually like getting deals sent directly to their phones and redeemable through them. The way I see it, as long as deals are good and well-targeted, there will be few complaints. And anyway, opting out would always be a possibility, even as turning off your Wi-Fi might not be.

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