Will Bad Laws Defeat the Purpose of Mobile Payments?
There is no question that the use of smartphones as a contact-less form of payment is shaping up to be an important segment of the overall mobile payments industry. While major companies like Google have long offered smartphone users an NFC-enabled mobile payments system, many industry watchers believe that the recent debut of Apple Pay will spark even more growth in the burgeoning digital wallet market this year. With a U.S. mobile payments market that is expected to reach $142 billion by 2019, according to Forrester Research, the use of smartphones as a form of payment could soon become as widespread as plastic cards are today.
However, the growth of this lucrative market could end up being hampered by poorly conceived laws. According to a KMBC News report highlighted by the Mac Observer, a Missouri lawmaker is proposing a bill that would require merchants to check a person’s state driver’s license or other identification every time he or she used a mobile payments system such as Apple Pay or Google Wallet. Merchants would also have to record a mobile payment device user’s license or identification number in order to avoid being held liable if it turned out that the device was stolen.
The bill was introduced by Democratic Rep. Joshua Peters of St. Louis, who said that the law will help prevent fraud if a person’s mobile device is lost or stolen. While Peters appears to have good intentions behind his reasoning for the law, this measure would likely seriously hamper the growth of the mobile payments market, since one of the primary reasons for using smartphones as a method of payment is the convenience that it offers.
This isn’t a matter of choosing between convenience and security. Most mobile payments systems are actually far more secure than traditional credit cards. While some mobile payment systems only require the user to enter a personal identification number (PIN), others, like Apple Pay, require a user to authorize each purchase with a fingerprint. Either way, it is far easier to create a fake photo ID than it is to guess someone’s PIN or forge a fingerprint.
By requiring merchants to record a customer’s license or identification information, the proposed measure creates new security issues. There have already been several highly publicized data breaches at various major retailers that exposed customers’ credit and debit card information. Apple Pay and Google Wallet both use a tokenization technology that ensures a user’s actual card numbers are not shared with a merchant. Requiring a merchant to record a user’s state driver’s license or identification number could unnecessarily expose more customer data to many of the same retailers that have already proven incapable of securing the data that is in their possession.
For the sake of mobile payment systems, this bill can’t pass final approval in Missouri, and similar laws can’t be proposed in other states. It’s hard to imagine users adopting a relatively new mobile payment system if the process is made less secure and more inconvenient than using traditional magnetic stripe credit or debit cards.
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