Mobile Payments: Consumer Benefits & New Privacy Concerns

Abstract

Payment systems that allow people to pay using their mobile phones are promised to reduce transaction fees, increase convenience, and enhance payment security. New mobile payment systems also are likely to make it easier for businesses to identify consumers, to collect more information about consumers, and to share more information about consumers’ purchases among more businesses. While many studies have reported security concerns as a barrier to adoption of mobile payment technologies, the privacy implications of these technologies have been under examined. To better understand Americans’ attitudes towards privacy in new transaction systems, we commissioned a nationwide, telephonic (wireline and wireless) survey of 1,200 households, focusing upon the ways that mobile payment systems are likely to share information about consumers’ purchases. We found that Americans overwhelmingly oppose the revelation of contact information (phone number, email address, and home address) to merchants when making purchases with mobile payment systems. Furthermore, an even higher level of opposition exists to systems that track consumers’ movements through their mobile phones.We explain some advantages of mobile payment systems, some challenges to their adoption in the United States, and then turn to our main finding: Americans overwhelming reject mobile payment systems that track their movements or share identification information with retailers. We then suggest a possible remedy for such information sharing: adapting provisions of California’s Song-Beverly Credit Card Act, which prohibits merchants from requesting personal information at the register when a consumer pays with a credit card, to mobile payments systems. Our survey results suggest that consumers would support limitations on information collection and transfer. Song-Beverly could be adopted to accommodate those who wish to share their transaction data.

Full text

Chris Jay Hoofnagle
Jennifer M. Urban
Su Li
MOBILE PAYMENTS:
CONSUMER BENEFITS &
NEW PRIVACY CONCERNS

1
Mobile Payments:
Consumer Benefits &
New Privacy Concerns
Chris Jay Hoofnagle*, Jennifer M. Urban† & Su Li‡
BCLT Research Paper§
April 24, 2012
Introduction: mobile payments shift the privacy landscape ................ 2!
Benefits of mobile payments .............................................................. 3!
Still, challenges to mobile payment adoption remain .................. 4!
Mobile payment systems raise new, unique privacy risks ........... 5!
A rise in telemarketing and commercial email? ........................... 7!
The network will know more about consumer purchases ............ 8!
Survey results ..................................................................................... 9!
Tracking consumers as they browse .............................................. 9!
Sharing information at point of sale with merchants .................. 11!
Likelihood of adoption ............................................................... 12!
Age and privacy of mobile payments ........................................ 13!
Identification restrictions in California law recognize consumers’
concerns, but are too business-practice specific to be applicable
here ............................................................................................... 14!
Identification restrictions in California law, if modified, could provide
a model applicable to mobile payments ........................................ 16!
Methods ............................................................................................ 18!
Survey questions .............................................................................. 19!
* Chris Jay Hoofnagle is a Lecturer in Residence at UC Berkeley Law and Senior
Staff Attorney to the Samuelson Law, Technology & Public Policy Clinic.
† Jennifer M. Urban is Assistant Clinical Professor of Law at UC Berkeley Law,
and Director of the Samuelson Law, Technology & Public Policy Clinic.
‡ Dr. Su Li is Statistician of Empirical Legal Studies at UC Berkeley Law.
§ The underlying survey research for this paper was fully funded by Nokia, Inc. as
part of an unrestricted research gift to the Berkeley Center for Law and
Technology. The cover image is Marcus Licinius Crassus by WikiMedia
Commons user cjh1452000.

2
Introduction: mobile payments shift the privacy
landscape
Payment systems that allow people to pay using their mobile phones
are promised to reduce transaction fees, increase convenience, and
enhance payment security. New mobile payment systems also are
likely to make it easier for businesses to identify consumers, to collect
more information about consumers, and to share more information
about consumers’ purchases among more businesses. While many
studies have reported security concerns as a barrier to adoption of
mobile payment technologies, the privacy implications of these
technologies have been under examined. To better understand
Americans’ attitudes towards privacy in new transaction systems, we
commissioned a nationwide, telephonic (wireline and wireless) survey
of 1,200 households, focusing upon the ways that mobile payment
systems are likely to share information about consumers’ purchases.
We found that Americans overwhelmingly oppose the revelation of
contact information (phone number, email address, and home
address) to merchants when making purchases with mobile payment
systems. Furthermore, an even higher level of opposition exists to
systems that track consumers’ movements through their mobile
phones.
Below we explain some advantages of mobile payment systems,
some challenges to their adoption in the United States, and then turn
to our main finding: Americans overwhelming reject mobile payment
systems that track their movements or share identification information
with retailers. We then suggest a possible remedy for such
information sharing: adapting provisions of California’s Song-Beverly
Credit Card Act, which prohibits merchants from requesting personal
information at the register when a consumer pays with a credit card,
to mobile payments systems. Our survey results suggest that
consumers would support limitations on information collection and
transfer. Song-Beverly could be adopted to accommodate those who
wish to share their transaction data.

3
Benefits of mobile payments
Mobile payment technologies could bring many benefits to
consumers and merchants. Mobile payment systems could act as a
digital wallet, storing coupons and loyalty information. These
systems may even be able to “find” and offer coupons to the
consumer.
Because of the growing storage and computing capacity of mobile
phones, they could also become repositories for our purchases.
Mobile payment technologies could help customers keep purchase
records, and could address the problem of lost receipts and rejected
returns.
There is also the potential for better payment security. In most credit
card transactions, consumers use the same number over and over
again to effectuate charges, without a Personal Identification Number
(PIN). Neither consumers nor companies can possibly ensure that
the array of individuals who handle credit card numbers keep them
securely. Mobile payment technologies could leverage information
about the consumer, location information, security features on the
device, and one-time account identifiers to more effectively verify
buyers’ identifies, thereby achieving more secure transactions.
Properly implemented, such advances could reduce the harm created
by stolen credit card numbers and make it more difficult to engage in
in-person credit card fraud.
In a best-case-scenario adoption, mobile payment systems will
reduce the overall cost of transactions. Currently, credit card
transactions (and their generous frequent-flyer, cashback, and related
rewards) are supported by merchants and consumers who pay with
cash. Fees absorb two to three percent of the money exchanged in a
credit transaction. To take one example of the effect of this cost,
interchange fees represent the second highest expense (after payroll)
at Target stores.5
5 Andrew Martin, Card Fees Pit Retailers Against Banks, NEW YORK TIMES, Jul.
16, 2009, at B1.

4
New mobile payment systems, however, could directly pull funds from
consumers’ bank accounts, thus eliminating credit risk and its
attendant fees (and other costs) for merchants. This could make
transactions more efficient, leading to discounts or lower prices.
Still, challenges to mobile payment adoption remain
Many challenges yet remain to the adoption of new payment
systems. At the most basic level, mobile payment providers must sell
the system to both merchants and consumers simultaneously.
Providers must convince merchants to build infrastructure at the point
of sale. To do so, they must persuade enough consumers to adopt
mobile payments that merchants find the system profitable.
This chicken-and-egg problem in merchant and consumer adoption
leads providers to leverage existing services, such as credit card
networks or carrier billing, to effectuate the actual payment. These
existing services are owned by sophisticated and powerful companies
that may be resistant to change. Combined, these challenges make
it very difficult for new actors to start a competing, independent
payment network that is more than an enhancement to an existing
payment system.
One key strategy to surmount the adoption challenges on the
merchant side is to leverage mobile payment systems’ new
capabilities for the collection and use of consumer personal
information. As explained further below, traditional cash- and credit-
card-based systems provide relatively limited customer information to
these parties at the point of sale. Mobile payment technologies offer
the ability to collect more information than before, and share it with
different participants in transactions, providing an attractive service
enhancement to both merchants and payment providers.
Enhancing customer information collection would also, however, raise
privacy issues and attendant consumer concerns. Several
researchers have examined privacy attitudes in the context of mobile
payments. Most of these studies were performed outside the United

5
States, but nevertheless help explain the high level of rejection we
discuss later in this paper. For instance, a study of consumers in
Germany identified confidentiality of data as the most important
concern with mobile payments, even outweighing the concern that
such systems will impose direct costs upon the consumer.6 A
majority in the same study indicated that anonymity in transactions
was a key function serving consumers’ overall interest in
confidentiality. Similarly, a focus group study of Finnish consumers in
2001 and 2002 found that, “some of the respondents were unwilling
to trust their personal information with the payment service providers.
They were concerned that their purchases would be tracked or that
they would begin to receive a lot of advertisements.”7 As such, there
is some existing evidence that consumer privacy concerns may pose
a barrier to mobile payment system uptake.
Mobile payment systems raise new, unique privacy risks
To gain a fuller understanding of the new privacy issues in mobile
payments, one needs to be familiar with the information flows in a
standard credit card transaction.
In a typical credit card transaction, all parties to the transaction get an
incomplete view of the sale.
The merchant collects information about what the consumer bought
(Stock Keeping Unit (SKU) information, known as “Level 3” data) and
the name of the consumer. In most cases, this Level 3 data is not
transferred to any other participant in the transaction. Despite
knowing what the consumer actually bought, merchants are
6 K. Pousttchi, Conditions for Acceptance and Usage of Mobile Payment
Procedures, in Giaglis, G. M.; Werthner, H.; Tschammer, V.; Foeschl. K.:
MBUSINESS 2003 - The Second International Conference on Mobile Business.
Vienna 201-210 (2003).
7 Tomi Dahlberg, Mallat Niina & Öörni Anssi, Trust Enhanced Technology
Acceptance Model - Consumer Acceptance of Mobile Payment Solutions,
Presentation at Stockholm Mobility Roundtable Stockholm Sweden May 2223:10
(2003), available at
http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.200.7189&rep=rep1&ty
pe=pdf.

6
practically limited in using that information, because they often cannot
uniquely identify their customers. Names are not unique, and thus
merchants cannot use credit card swipes alone to create a reliable
consumer database, with individuals tied to their Level 3 purchase
histories. This is one reason why many merchants use loyalty cards.
Loyalty cards allow the merchant to uniquely identify the consumer
even where she uses different methods of payment.8
The payment network (including, for instance, Visa, MasterCard, and
American Express) receives very little information from the
transaction. The payment network itself may only receive the
account number, the amount of the charge, and the merchant’s
identity.
The banks involved (the merchant’s and consumer’s banks), typically
only receive similar information to the payment networks: the total
amount of the purchase, where the purchase was made, and the
consumer’s unique identity (in case of the consumer’s bank). Airline
and hotel reservations are a common exception to this limited
information transfer. In many cases, reservation information is
transferred back to the consumer’s bank and appears on her bill.
New mobile payment systems may disrupt these arrangements by
enabling merchants to collect personally-identifiable contact
information from consumers, and by transferring Level 3 data to
payment networks. With these capabilities, all of the service
8 Merchants may also employ other consumer reidentification systems, for
example, where other information is requested from the consumer (such as zip
code) at the point of sale and used to uniquely identify the consumer. See e.g.
Pineda v. Williams-Sonoma Stores, 51 Cal.4th 524, 2011 WL 446921 (2011)(The
store collected consumers' names from credit card swipes, requested the zip
code, and then: “Defendant subsequently used customized computer software to
perform reverse searches from databases that contain millions of names, e-mail
addresses, telephone numbers, and street addresses, and that are indexed in a
manner resembling a reverse telephone book. The software matched plaintiff's
name and ZIP code with plaintiff's previously undisclosed address, giving
defendant the information, which it now maintains in its own database. Defendant
uses its database to market products to customers and may also sell the
information it has compiled to other businesses.”)

7
providers in the payments ecosystem—merchants, payment
networks, and the banks involved in the transactions—could develop
much more comprehensive and detailed dossiers about consumer
purchase behavior than they typically have today. The capabilities of
new payment systems will, for example, make it easier for merchants
to build customer databases without resorting to loyalty cards.
This possible shift has profound consequences for consumer privacy
and the relationship consumers have with payment providers and
merchants. The need for loyalty cards will be eliminated, but so too
could the ability of individuals to avoid profiling. Many consumers
have long been uncomfortable with information collection surrounding
their purchases. Such information collection could cause
embarrassment, lead consumers to avoid buying certain items, or
possibly contribute to systems that institute widespread service and
price discrimination.9
A rise in telemarketing and commercial email?
Beyond profiling more generally, sharing contact information at the
register exposes the consumer to the specific legal and practical risks
of receiving more telemarketing and spam.
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
9 Oscar H. Gandy, Jr., THE PANOPTIC SORT: A POLITICAL ECONOMY OF PERSONAL
INFORMATION. CRITICAL STUDIES IN COMMUNICATION AND IN THE CULTURAL
INDUSTRIES (Westview 1993).
10 16 C.F.R. § 310.2(n).

8
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.
The network will know more about consumer purchases
Beyond merchants, the payment network itself could also receive
more information. Some of the companies most likely to be
successful in mobile payments have designed their systems to collect
Level 3 data about consumers’ purchases (for example, PayPal,
Google Checkout, and Facebook Credits appear to work this way).12
11 47 U.S.C. § 227.
12 For example, Google Checkout’s privacy policy (which is the same as its
Google Wallet policy) states:
Transaction information - When you use the Processing Service to
conduct a transaction, we collect information about each transaction,
including the transaction amount, a description provided by the seller of
the goods or services being purchased, the names of the seller and buyer
and the type of payment used. We may also collect transaction data from
your use of the Mobile Wallet. For example, if you use the Mobile Wallet
Application to make a purchase at a merchant or download a merchant
coupon, we may obtain information regarding that transaction from the
Mobile Wallet Application, from the merchant and/or a partner, as
applicable. The information may include the date and time of the
purchase, the store location, the amount of the purchase, and the offer
associated with the transaction.
Google Wallet Privacy Policy,
https://checkout.google.com/files/privacy.html?gl=US&hl=en (last visited April 24,
2012)(emphasis added). Google does state in an FAQ that its current NFC Wallet
product does not collect Level 3-type data: “Google Wallet does not currently
receive data about what products you purchase using the mobile NFC-powered
app.” We are not certain why these statements differ for the Mobile Wallet versus
the NFC Wallet app, but we note that the Privacy Policy appears to allow
collecting Level 3 data at any time.

9
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.
Thus, a move to mobile payments could carry with it a move to a
profoundly different relationship between customers and payment
system service providers than has existed in the past. Further, there
is no guarantee that this shift would be apparent to consumers using
mobile payments systems to complete sales transactions.
Survey results
In order to learn more about consumers’ privacy attitudes concerning
mobile payments and privacy, we commissioned a nationwide,
telephonic survey of Americans. We formulated questions to reflect
the probable design of mobile payments systems, based on current
vendor behavior and plans for embedding the advantages we
described above into the new systems.
Overall, Americans strongly reject systems that would track them as
they browsed stores and those that would share personal information
with the merchant at the register.
Tracking consumers as they browse
During last season’s “Black Friday,” some shopping centers proposed
to capture signals from consumers’ wireless phones to track them as
they shopped and walked through the mall.13 These proposals quickly
13 Sean Gallagher, We're watching: malls track shopper's cell phone signals to
gather marketing data, ARS TECHNICA, Nov. 2011, available at
http://arstechnica.com/business/news/2011/11/were-watching-malls-track-
shoppers-cell-phone-signals-to-gather-marketing-data.ars

10
became controversial, and two shopping centers that enrolled in a
tracking plan cancelled them.14
Collecting such information from wireless phones may violate the
federal Pen Register Act.15 Still, other companies are exploring ways
to track individuals uniquely through signals emitted from phones.
One system developed by Euclid tracks consumers through the “MAC
address” that uniquely identifies a smartphone.16 The MAC (for
“Media Access Control”) address is transmitted whenever the
consumer has WiFi enabled. Similarly, Navizon I.T.S. claims that it
can track, “any Wi-Fi enabled smart phone or tablet, including
iPhones, iPads, Android devices, BlackBerry, Windows Mobile,
Symbian and, of course, laptops.”17 As with many other tracking
technologies, it seems to be designed to operate without the
knowledge of the individual. Navizon claims, “Unobtrusive
surveillance / Navizon I.T.S. works in the background, quietly and
unobtrusively locating Wi-Fi- enabled devices…No application is
needed on the devices to be tracked. The only requirement is that
their Wi-Fi radios be turned on, which is the default in most smart
phones, tablets and laptops.”18
If information about the phone is combined with other data, it is very
likely that individuals will be identified based upon attributes of their
phones. There is concern, for instance, that individuals can be
monitored and identified through unique IMSI (for “International
Mobile Subscriber Identity”) numbers, which, like MAC addresses,
are embedded in users’ phones and are transmitted during normal
use of the device. In order for consumers to prevent tracking based
14 Annalyn Censky, Malls stop tracking shoppers' cell phones, CNN MONEY, Nov.
28, 2011, available at
http://money.cnn.com/2011/11/28/news/economy/malls_track_shoppers_cell_ph
ones/index.htm.
15 18 U.S.C. § 3121.
16 EUCLID, HOW DO WE COLLECT INFORMATION, Aug. 3, 2011, available at
http://euclidelements.com/how-do-we-collect-information.
17 NAVIZON, TRACK WI-FI ENABLED DEVICES INDOORS WITH FLOOR/ROOM-LEVEL
ACCURACY, available at http://www.navizon.com/its.php.
18 Id.

11
upon these technologies, they must either disable the WiFi on their
phones (in the case of MAC address tracking) or turn off their phones
entirely (if IMSI catchers are being employed).
We asked Americans whether they thought that phones should share
information with stores when they visit and browse without making a
purchase. Overwhelmingly, subjects rejected this possibility. Ninety-
six percent objected to such tracking, with 79 percent stating that they
would “definitely not allow” it and 17 percent stating that they would
“probably not allow” it.
Sharing information at point of sale with merchants
As explained above, retailers presently receive very little information
about the consumer when she pays with a credit card or cash.
Merchants are restricted in how they can collect data about
consumers at the register, both through credit card acceptance
agreements and by practical considerations.
Mobile payments systems, however, could be configured to
automatically convey uniquely consumer-identifying information to the
retailer at the point of sale for later marketing or analytics use. We
asked Americans about their preferences for being identified to the
merchant through mobile payments systems—specifically, whether
they would be willing to have their phone number, email address, or
postal mail address shared with retailers.
We found that 81 percent19 objected to the transfer of their telephone
number to a store where they purchase goods. Only 15 percent
would “probably allow” such sharing, and three percent would
definitely allow it.
Consumers’ home addresses seem to be just as sensitive as their
telephone numbers. Eighty-one percent20 said that they either
19 Specifically, 65 percent stated that they would “definitely not allow” this
sharing; 16 percent would “probably not allow” it.
20 Specifically, 66 percent stated that they would “definitely not allow” this
sharing; 15 percent would “probably not allow” it.

12
definitely or probably would not allow sharing of their home address
with a retailer. Similar to phone numbers, only 14 percent would
probably allow such sharing, and three percent would definitely allow
it.
While opposition to information sharing at the register is strong in all
categories we analyzed, email sharing seems to be the least
sensitive category. Thirty-three percent would be willing or probably
willing to share email addresses at the register. Still, 51 percent
stated that they would definitely not allow their emails to be shared,
and 16 percent stated that they probably would not allow it.
Likelihood of adoption
We found that over three-quarters (74 percent) of Americans said that
they are “not at all likely” or “not too likely” to adopt mobile payment
systems. Just 24 percent say that they are likely to adopt mobile
payments.
The Federal Reserve recently published statistics on mobile
payments, finding that, “Mobile payments are disproportionately used
by younger consumers…Individuals age 18 to 29 account for 37
percent of mobile payment users relative to 22 percent of all mobile
phone users, while individuals age 30 to 44 account for a further 36
percent of mobile payment users relative to 27 percent of all mobile
phone users.”21
We looked at a related issue—likelihood of adoption of mobile
payments. We found that respondents’ inclination of adopting mobile
payments varies by age. The age difference overall is statistically
significant (p=0.000), though no age cohort exhibits a majority that
expresses likelihood to adopt the technology. Those most
enthusiastic about the technology are in the 35-44 age range (16%
21 Matthew B. Gross, Jeanne M. Hogarth & Maximilian D. Schmeiser, Consumers
and Mobile Financial Services, Federal Reserve Board Survey (Mar. 2012),
available at
http://www.federalreserve.gov/newsevents/press/other/20120314b.htm.

13
are “very” and 21% “somewhat” likely to adopt the technology). Our
oldest cohorts (55-64 and 65+) both were less likely to adopt mobile
payments than other age cohorts (only 4% are “very” and 6%
“somewhat” likely to adopt) and more likely to reject them (76% “not
at all likely to adopt” the technology).
Age$and$privacy$of$mobile$payments$
Consumers’ willingness to be tracked in stores through their wireless
phones, and to share phone numbers, email addresses, and home
addresses with stores, varies by age. But this is significant only for
some categories. For example, the willingness to share one’s home
address—roundly rejected across all age groups—does not differ
significantly by age, while the willingness to share email address
does. It is important to note that generally, there is overwhelming
opposition to all of these schemes.
While all age cohorts reject the idea of sharing phone numbers with
stores where a purchase has been made, the level of rejection varies,
becoming, in general, more intense with age. There appears to be a
slight bend in this age trend—again, the 35-44 age group rejects the
idea the least (77% said “probably” no or “definitely” no), and is most
likely to answer “definitely” or “probably” yes to sharing phone
numbers with merchants. However, these differences are not
statistically significant and all groups reject sharing at around 80
percent.
Of all the types of personal information we inquired about, consumers
were most willing to share their email addresses with stores. While
majorities in every age group still rejected this sharing, rejection was
somewhat less intense than for phone numbers, especially for people
under 45 years old. This question, in fact, produced the biggest
difference among age groups of all three types of personal
information we asked about. People 18-24 years old are significantly
(p=0.002) more likely to share email addresses with stores than other
age groups, with 41 percent answering that they would “definitely” or
“probably” allow this. Further, there is a noticeable split between

14
people 44 and younger and people 45 and older, with the younger
people significantly (p=0.001) more likely to allow email sharing.
Large majorities of consumers in every age group rejected the idea of
mobile payment systems sharing home addresses with merchants;
here, differences between age cohorts were not significant. Overall,
81 percent of consumers said that they would “probably” or
“definitely” not allow home address collection.
Even larger majorities rejected the idea of phones sharing information
with stores when consumers are simply browsing, as attempted
during the “Black Friday” initiative we describe above. Ninety-six
percent of those surveyed rejected this option, with more than 90
percent of every age group answering that they would “probably” or
“definitely” not allow it.
Identification restrictions in California law recognize consumers’
concerns, but are too business-practice specific to be applicable
here
In the 1980s, some merchants routinely asked consumers to share
their addresses and other contact information when they paid with a
credit card. This raised several privacy concerns. Cashiers might
use the information to stalk customers, or to steal their identities.
More broadly, there was concern that consumers mistakenly believed
that they had to provide this information in order to pay with a credit
card, and thus that consumers were unwittingly participating in the
creation of direct marketing databases about their purchases. For
instance, in 1992 the New York Attorney General reached a
settlement with American Express for profiling customers into direct
marketing databases, including (from low to high-end), “value
seeker,” “fashion conscious,” “Fifth Avenue sophisticated, and
“Rodeo Drive chic.”22 Former New York Attorney General Robert
Abrams declared, "A consumer who pays with a credit card is entitled
to as much privacy as one who pays by cash or check…Credit
cardholders should not unknowingly have their spending patterns and
22 A Tighter Reign on Credit Data for Marketing Urged, 2 CREDIT RISK
MANAGEMENT REPORT v. 11, May 25, 1992.

15
life styles analyzed and categorized for the use of merchants fishing
for good prospects."23
With similar concerns in mind, the California Legislature prohibited
merchants from requiring personal information in credit card24
transactions at the register 1990, in amendments to the Song-Beverly
Credit Card Act.25 The statute’s “overriding purpose was to ‘protect
the personal privacy of consumers who pay for transactions with
credit cards.’”26 Specifically, the Legislature wished to prohibit
businesses from, “requiring information that merchants, banks or
credit card companies do not require or need.”27 Within a year, the
Legislature found it necessary to strengthen the law, prohibiting
merchants from even requesting personal information in credit card
transactions.28
23 Peter Pae, American Express Co. Discloses It Gives Merchants Data on
Cardholders' Habits, WALL STREET JOURNAL, May 14, 1992, page A3.
24 “Credit card" means “any card, plate, coupon book, or other single credit
device existing for the purpose of being used from time to time upon presentation
to obtain money, property, labor, or services on credit.” Cal. Civ. Code §
1747.02.
25 1990 Cal ALS 999; 1990 Cal AB 2920; 1990 Cal Stats. ch. 999. These
provisions were added to the Song-Beverly Credit Card Act of 1971.
26 Pineda v. Williams-Sonoma Stores, Inc., 51 Cal. 4th 524, 246 P.3d 612,
120 Cal. Rptr. 3d 531 (Feb. 10, 2011), quoting Assem. Com. on Finance and
Ins., Analysis of Assem. Bill No. 2920 (1989–1990 Reg. Sess.) as amended Mar.
19, 1990, p. 2 (“The Problem…Retailers acquire this additional personal
information for their own business purposes — for example, to build mailing and
telephone lists which they can subsequently use for their own in-house marketing
efforts, or sell to direct-mail or telemarketing specialists, or to others.”)
27 Pineda v. Williams-Sonoma Stores, Inc., 51 Cal. 4th 524, 246 P.3d 612,
120 Cal. Rptr. 3d 531 (Feb. 10, 2011), quoting (Assem. Com. on Finance and
Insurance, Analysis of Assem. Bill No. 2920 (1989-1990 Reg. Sess.) as
amended Mar. 19, 1990, p. 2.).
28 1991 Cal ALS 1089; 1991 Cal AB 1477; 1991 Cal Stats. ch. 1089; see also
Florez v. Linens ’N Things, Inc. 108 Cal.App.4th 447,453 (2003)(“The obvious
purpose of the 1991 amendment was to prevent retailers from ‘requesting’
personal identification information and then matching it with the consumer’s credit
card number.”).

16
While the statutory text suggests that mobile payment technologies
would be subject to the privacy provisions of the Song-Beverly Act as
it now stands,29 the Act was designed to address merchants’
demands for information. It does not speak to how payment networks
themselves could design systems to automatically collect data about
the consumer. Thus, as is the case with many other sectoral-specific
privacy laws, changes in technology can circumvent hard-won
consumer protections.
Identification restrictions in California law, if modified, could provide
a model applicable to mobile payments
Given our finding that consumers overwhelmingly reject the collection
of personal information at the point of sale via mobile payment
systems, we think that the Song-Beverly model should be updated to
cover payments systems as well as merchants at the point of sale. 30
Song-Beverly’s restrictions are particularly strict, completely
foreclosing the ability of the merchant to ask for information at the
register. Strict rules were necessary, because as explained above,
merchants continued to elicit personal information from consumers in
clever ways, culminating in the zip-code reidentification system
challenged in Pineda.
29 It broadly defines “credit card” to include “single credit device[s] existing for the
purpose of being used from time to time upon presentation to obtain money,
property, labor, or services on credit.” Cal. Civ. Code § 1747.02. This definition
mirrors Regulation Z. 12 C.F.R. § 226.2(a)(15). A supplement to Regulation Z
provides examples of “credit cards,” but none addresses mobile payments. See
12 C.F.R. pt. 226, Supp. 1 § 226.2(a)(15). The language “from time to time”
concerns payment technologies can be used multiple times, as opposed to
checks and “similar instruments that can be used only once to obtain a single
credit extension…” 12 C.F.R. pt. 226, Supp. 1 § 226.2(a)(15)(1).
30 Further, it may be useful to clarify that the updated law clearly covers non-
paper-based transactions. Although we think this likely is a mistaken reading of
Song Beverly, at least one federal district court, in a pair of cases, recently
interpreted Song-Beverly to apply only to “pen-and-paper” transactions, and not
“electronic entry of numbers on a keypad or touchscreen.” Salmonson v.
Microsoft Corp., 2012 U.S. Dist. LEXIS 4632 at 4-5 (C.D. Cal. Jan. 6, 2012); see
also Mehrens v. Redbox Automated Retail LLC et al., 2012 U.S. Dist. LEXIS
4632 at 5 (C.D. Cal. Jan. 6, 2012).

17
If control over the decision to share transactional information is firmly
in the hands of the user, it stands to reason that rules could be
crafted to allow more liberalized information sharing. Rules could
allow those who wish to share transactional data with merchants or
others. An opt-in standard on a per-transaction basis could empower
consumers to share where they find it appropriate but block this
information collection and sharing by default. To make these
protections meaningful, the decision to share must truly be voluntary.
Merchants should not be able to imply that information sharing is
required, or otherwise condition the provision of products or
services.31
While the technology has shifted such that payments operators could
also play the role of the 1980s information-demanding merchant, the
issue remains the same: consumers’ unwitting participation in
contributing to detailed purchase profiles at the point of payment.
Indeed, mobile payments systems could be designed to give less
notice to the consumer, as identification, address, and Level 3 data
could automatically be collected, aggregated, and shared, without the
customer being actively asked for the information, at all. This model
would also level the playing field between credit card, cash, and
mobile transactions, and make it less likely that consumers’ personal
information will stand in as the value exchange in place of fees.
The broad agreement we found among Americans that they value
privacy at the point of sale, suggests strong support for a modified
version of Song-Beverly at the federal level. This would ensure that
all Americans’ expectations for privacy in their point-of-sale data are
respected, and that payments systems operators and merchants alike
have one, uniform regulatory model for handling point-of-sale
information.
31 We have not yet worked out an optimal model for this. We intend to take up
the question of intervention in the mobile payments ecosystem in more detail in a
future paper.

18
Methods
The Berkeley Consumer Privacy Survey obtained telephone
interviews with a nationally representative sample of 1,203 adult
internet users living in the continental United States. Telephone
interviews were conducted by landline (678) and cell phone (525,
including 235 without a landline phone). Overall, 6,906 working
landlines and 8,688 working cell phones were dialed. The response
rate for the landline samples was 16 percent. The response rate for
the cellular samples was 14 percent.
The survey was conducted by Princeton Survey Research Associates
International (PSRAI), and was fully funded by Nokia, Inc. as part of
an unrestricted gift to the Berkeley Center for Law and Technology.
The content of the survey was entirely composed by Berkeley Law’s
Chris Jay Hoofnagle & Jennifer M. Urban. Interviews were done in
English by Princeton Data Source from January 27-February 12,
2012. Statistical results are weighted to correct known demographic
discrepancies. The margin of sampling error for the complete set of
weighted data is ± 3.4 percentage points.

19
Survey questions
Companies are developing new systems that would let consumers pay for items
with their cell phones. These systems would let you use your phone like a credit
card. How likely are you to use such a system ….(READ)
Based on cell phone owners (n=1119)
9
Very likely
15
Somewhat likely
19
Not too likely OR
55
Not at all likely?
1
Don't know/Refused
If you decided to start using your cell phone to pay for items, would you definitely
allow, probably allow, probably NOT allow, or definitely NOT allow this service to
(INSERT. READ AND RANDOMIZE ITEMS B-D). What about (INSERT NEXT
ITEM)?
READ AS NECESSARY: Would you definitely allow, probably allow, probably
NOT allow, or definitely NOT allow this?
Based on cell phone owners (n=1119)
Definitely
allow
Probabl
y
allow
Probably
not allow
Definitely
not allow
DK/Ref
.
a. Share information about you
with the stores that you visit,
when you are just browsing
1
3
17
79
*
b. Share your phone number with
the stores where you make
purchases
3
15
16
65
*
c. Share your email address with
the stores where you make
purchases
6
27
16
51
1
d. Share your home address with
the stores where you make
purchases
4
14
15
66
1