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By blinding retailers, mobile payments may boost privacy

Kelly Dilworth

When Apple Senior Vice President Eddy Cue introduced the company’s mobile payment system Apple Pay last month, he made a pointed comment about its privacy features: “Security is at the core of Apple Pay, but so is privacy,” said Cue. “We are not in the business of collecting your data. So, when you go to a physical location and use Apple Pay, Apple doesn’t know what you bought, where you bought it or how much you paid for it.”

Retailers are also kept in the dark, he said. “Cashiers don’t see your name, your card number or your security code.” So stores can’t track your purchases. Nor can they sell that information to data brokers.

The next generation of mobile payments: A safer, more private way to pay?

That could mean that if Apple Pay and similar mobile payment systems catch on with enough people, it will help undermine a shadow industry that’s been collecting and selling people’s purchase histories for years. It may also help attract more privacy and security-conscious cardholders to mobile payments, which have struggled to gain traction with consumers.

In an Oct. 6 commentary for The New York Times, CNN Money reporter Jose Pagliery elaborated on the appeal of mobile payments. “Smartphones can cut retailers out of the loop. Merchants should never get our data because they’ve shown they can’t protect it. Instead, they should receive a token — something that doesn’t say anything about the customer or the customer’s wallet. Only your bank knows it’s you and approves the transaction.”

According to a patent application released Oct. 9, that appears to be how the new Apple Pay system works. The patent application, which was filed by Apple but doesn’t directly name Apple Pay, describes a system in which retailers are provided with a unique identifier or “token.” But they’re not provided with any personally identifying information, such as your name or credit card details.

That not only protects your data from the prying eyes of retailers who are eager to learn more about your lifestyle and preferences; it also shields your credit card details from fraudsters who have hacked into a retailer’s payment system, says AppleInsider’s Mikey Campbell, who first reported on the patent. “Tokenizing payment data makes it useless to would-be thieves who manage to intercept the information during the transmission process,” writes Campbell.

For consumers who are weary of using their cards at retailers that are vulnerable to data breaches, mobile payment systems such as Apple Pay could be a viable alternative.

A game-changer for mobile payments?
Since Apple Pay was introduced Sept. 9, naysayers have said that Apple’s foray into mobile payments is likely to fail just as resoundingly as its predecessors.

After all, consumers have so far shown little interest in mobile payments. According to a poll by CreditCards.com, 44 percent of consumers said they still wouldn’t use mobile payments if given the chance. Eighteen percent said they’d rarely use it.

Meanwhile, consumer advocates have expressed worry that if mobile payments do begin to catch on after years of lackluster growth, it could undermine consumer privacy and make people’s personal details even less safe than they already are. “There’s a lot of unscrupulous companies out there that just want to make a buck,” said the Center for Digital Democracy’s Jeff Chester in an interview with CreditCards.com.

But Apple’s approach to consumer protection and privacy is so different from competitors such as Google Wallet — which does store customer payment information — that privacy-conscious consumers may decide to give Apple Pay a spin. That could ultimately lead to more mobile payment providers taking a cue from Apple and developing applications that don’t store or transmit your personal information.

After all, using your cellphone to make payments isn’t much more convenient than pulling out a card and swiping it. But if it can help protect your personal data from prying eyes, then it may be worth taking a chance and trying the system out.


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  • John

    I’m nervous about using my Phone to pay. If you loose your phone then you’re hosed.