Editor’s note: This will be the final installment of our Commerce Weekly series.
Mobile payments security, privacy concerns rise; Amazon may have a solution
The race is on to democratize mobile payments, to create a solution that improves the payment experience for consumers and merchants to the extent that it will replace traditional payment methods. Some experts, however, are concerned that technology developments are failing to address increasing concerns with security and privacy.
Kirk Ladendorf reports this week that smartphone security software company NQ Mobile noted a rise in worldwide phone malware threats from 24,000 in 2011 to 65,000 in 2012. In an interview with Ladendorf, Gavin Kim, chief commercial officer at NQ Mobile, warned that “[s]martphone sales are booming, and they are becoming a much more targeted device by hackers.”
Brent Warrington, CEO of online and mobile payment company SecureNet, disagreed, telling Ladendorf that he’s “comfortable and confident in the level of security of [payment] transactions” through his company, noting that the transaction information is “encrypted from end to end.”
While security concerns may be getting addressed, Ladendorf says that privacy advocates don’t see the same attention being given to privacy concerns and the “potential misuse of growing mountains of electronic data tied to the spending patterns of individual consumers.” Ladendorf notes that the same advances that make mobile payments more enjoyable and convenient also make it easier for companies to mine consumer data. He quotes from a McClatchy newspaper interview with Jeff Chester, executive director of the Center for Digital Democracy, in which Chester said, “[Mobile payment] is about exposing your financial behavior to a daisy chain of financial and other marketers who have a very detailed understanding of where you are, how you spend your time and what you buy.”
Amazon may be prepping a solution to the mobile payment privacy problem, and that might not be as off-focus for the company as it sounds on first blush. Darrell Etherington reports at TechCrunch that the USPTO published a new patent of Amazon’s this week that aims to limit the transaction data exchanged during the mobile payment process. “The patent describes a way to sub in unique identifiers for information like name and email address that would otherwise be used to verify the identities of buyer and seller,” Etherington writes. Users of the service would be issued tokens that would expire once the sale is complete, he explains, and only Amazon would know the identities of the buyer and seller.
Etherington notes that in practice, this system would make Amazon a competitor for payment companies like PayPal (which is owned by Amazon competitor eBay), and with the number of users and credit card numbers it already has on file, an expansion in this direction isn’t much of a stretch for Amazon. It would also mean that Amazon would be the only company to have the consumer data from those transactions.
Warby Parker takes showrooming to a new level
As rumors of online retailer intentions to open brick-and-mortar locations for showrooming purposes continue (Google, Amazon), GigaOm’s Om Malik looks this week at a smaller, more nimble online retailer who has actually launched the experiment.
Online eyewear company Warby Parker has opened a brick-and-mortar store in the Soho district of New York City. (We covered Warby Parker’s other showrooming experiment using a refashioned school bus in Commerce Weekly a few weeks ago.) This flagship store isn’t just a store, however. Malik notes the store’s unique approach:
“… the company is using sensors, Wi-Fi and other new technologies to understand how people use its retail space, taking that data and marrying it with its online sales trends and other information. As a result it can come up with unique business trends that not only lead to more interesting pricing models but also help give its design and sales teams vital intelligence.”
Malik predicts the Warby Parker store will become a research destination for online retailers looking to break into the brick-and-mortar world. You can watch a video of Malik’s chat with Warby Parker co-founder Neil Blumenthal in his post at GigaOm.
Paying with sound waves
Payments company Alipay has launched a new system that facilitates mobile payment transactions via sound waves. Catherine Shu reports at TechCrunch that the system is being piloted at vending kiosks in two Beijing subway stations and if successful will expand to the rest of the subway line and later into convenience and grocery stores. The system, she explains, uses white noise generated by a smartphone to transmit digital information to the kiosk to complete a payment transaction. Consumers open the Alipay Wallet app on their phone, hold it up to the kiosk, and wait for the “shoo-shoo-shoo” noise to indicate a completed transaction.
Shu reports that Alipay business development director Wang Yu-ming highlighted the security of the transactions in an interview with Xinhua (Google translate), explaining that “each sound transmission is unique to the transaction and is only valid for five minutes.” Shu notes that Alipay isn’t the first company to use sound waves to facilitate payments — startup company Naratte launched its Zoosh tech in 2011, which transmitted payments communications via ultrasonic sound waves.