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This Is Uncomfortable

Why retailers are teaming up for mobile payment

Molly Wood Aug 16, 2012
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Target, Walmart, Lowe’s, 7-11, Best Buy, a whole bunch of big retailers are teaming up on a new mobile payment system. It’s called Merchant Customer Exchange or MCX and it will let you pay for things using your smartphone.

They’re not the only ones trying this. Google has the Google Wallet system. AT&T, Verizon and T-Mobile are planning to launch one soon as well.

Adam Levitin teaches law at Georgetown.

Adam Levitin: The key question is going to be which system manages to establish itself as the standard. Because once a system establishes itself as the dominant system, there’s something known as the network effect that helps lock it in. Namely, imagine you had a telephone, and you’re the only person in the world with a telephone, it’s not very useful. But if lots of people have telephones, it becomes much more useful.

Moe: Like Facebook or Twitter.

Levitin: Exactly. The larger it gets, the more people who are using it, the more valuable that system gets and the less valuable alternative systems are.

All these mobile payment systems want to win this race because the prize is pretty big. No, the prize isn’t getting to help people and it’s not even the sales, at least not right away. It’s the data.

Bill Maurer runs the Institute for Money, Technology and Financial Inclusion at U.C. Irvine and says, “Who’s buying, what the market segments are, where they are, what kind of things they’re buying and how the information that’s captured at the point of sale can be leveraged for things like offers, loyalty, rewards, and that kind of thing.”

Which means you keep coming back. If this all sounds like online shopping, well, yeah. Maurer says, “When you shop at Amazon or on any other online merchant, you’re going to get recommendations that say people who bought what you just purchased have bought this other thing. The idea here is to move that online marketing model into the physical point of sale world where we’re buying products every day. If you think about it, the dominant way of making purchases still in the U.S. for a lot of things still is cash. All the data so to speak in a cash transaction is lost.”

Now, while you’re getting screaming deals, all that data about you is piling up on the store’s computers. There are strict laws on the books about keeping records on customers’ banking and communications.

But buying shoes or Diet Coke? Not a lot of protection. Which means those stores can share your data with other stores, or sell it, do all kinds of things.

Levitin says, “Bottom line is you basically can’t assume that you have very much data privacy, and there’s a trade-off for getting things like rewards points and having data privacy.”

Or you could just pay for things with money.

**

“Somebody’s watching me,” sang ’80s singer Rockwell. And he may have a point. Especially now that the LEMV is up in the air.

That stands for Long-Endurance Multi-Intelligence Vehicle, three of which are being built by Northrop Grumman for the US Army. The LEMV looks like a blimp but it’s more than a blimp.

A lot more. It’s called a hybrid airship. It’s longer than a football field and taller than a seven story building.

It’s designed to fly for 21 days straight, conducting surveillance with what Northrop Grumman calls an unblinking eye. It has no pilot on board either, it’s a drone.

And oh yeah, it’s real.

The LEMV completed a successful test just last week in the same part of New Jersey where the Hindenburg went down.

And what’s the LEMV going to be watching? Don’t know for sure but I figure, oh, the humanity.

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