The well-worn payment device

SmartwatchNow and then a product comes along that, seemingly overnight, proves indispensable, even though we had seemed to manage quite well without it before. The automobile comes to mind. So does Egg McMuffin. And, for a while, fidget spinners.

But at least people could readily grasp what automobiles, McMuffins, and fidget spinners were good for. This year marks the ten-year anniversary of a now-ubiquitous device initially greeted with a mix of curiosity, enthusiasm—and bafflement—as to why, exactly, anyone would want much less need one.

I refer to none other than iPad. On April 3, 2010, Apple Stores throughout the country opened their doors to lines of customers who had camped outside, eager to score one of the new tablet thingies on Day One. Observers weren’t sure what to make of the campers or of the device. Exactly one week later, NPR news-quiz show Wait Wait Don’t Tell Me quoted Steve Jobs’s diminutive description of the device (surely one of many times Apple’s marketing department wished they could muzzle him): “I’ll let you in on a little secret,” Jobs had said. “It is just a big iPhone without the phone.” When the call-in participant revealed that she happened to number among the first wave of iPad owners, host Peter Sagal quickly followed up, “It’s amazing. Immediately we go from like, you know, posture of mockery to, ooh, you have one?”

All posture of mockery was short-lived. iPad, I hardly need point out, was a hit. Not that it was the first tablet to come along. Many a lesser creature preceded it. Among these were Kindle, whose functionality at the time was limited to displaying books; and Palm Pilot, which was cool because you could hot sync it to your computer. But iPad’s versatility readily eclipsed them all.

Then, for a followup, along came a new Why-On-Earth-Would-Anybody-Need-That product category. Namely, smart wearables—such as watches, wristbands, and earwear. 

A few weeks ago,  PYMTS.com said:

The wearables global market is on track to ship 305.2 million units in 2019, up 71.4 percent from the 178 million units shipped in 2018. About 69.3 million smartwatches are expected to ship this year.

The growth of smartwatches as a category is encouraging for the payments industry, because a growing number of them support contactless payment via Google Pay. Warable.com lists 23 of them. As for contactless payment via Apple Pay, the number of smartwatches that support it is precisely what you would expect: one. I bet you can guess which one that is.

Encouraging as the growth of smartwatches is, and with it the growth of contactless payment via smartwatch, the leader in the wearables category is—drumroll please—earwear. MarketWatch reports:

Accounting for the majority of shipment volumes throughout our forecast is earwear, which is set to reach 139.4 million units this year and nearly double to 273.7 million units in 2023.

By “earwear,” MarketWatch isn’t referring to any old pair of ear buds or headphones. Rather:

For an earworn device to be considered a wearable by [International Data Corporation]’s definition, it must offer functionality beyond audio, like a smart assistant, health and fitness tracking, or audio experience enhancement.

I regretfully observe that “contactless payment” is patently absent from the above list of earwear capabilities. Perhaps that’s because, for security purposes, RFID chips must hover within an inch or so of readers, and few shoppers wish to contort themselves in order to rest an ear on a scanner.

Eclipsed though the smartwatch may be by earwear, MarketWatch projects that its future is nonetheless favorable:

69.3 million smartwatches will ship in 2019 and total volumes will reach 109.2 million units worldwide in 2023. Apple’s watchOS will remain in front throughout our forecast by a wide margin and function as the measuring stick against which all other smartwatch platforms are compared. Still, there is room for other platforms to grow: Android will have a strong following with kid-focused smartwatches; Samsung’s Tizen will cater to Samsung smartphone owners with features rivaling watchOS; and Google’s WearOS will benefit from having the longest list of hardware partners and the addition of Fitbit OS’s health and fitness capabilities.

For those inclined to ask what will they think of next?, perhaps it will be the contactless payment ring. In 2014, Hackaday writer James Hobson reported on a fellow who dissolved his RFID card in acetone, removed the chip, and reinstalled the chip with a new antenna on a ring. But don’t hold your breath. Until banks start issuing payment rings, anyone who wants one will have to DIY it. Not that I recommend trying. Indeed, more cautious DIY sites suggest obtaining—just in case—a duplicate card for experimentation purposes.

Meanwhile, Amazon is fast at work on the ultimate wearable. Ultimate, in that it’s a device that most of us already wear. Partnering with Visa, Mastercard, JPMorgan, and Wells Fargo, Amazon “plans to enable customers to connect their credit card information to their palms,” reports Finextra, “so they can complete purchases with a tap of their hand rather than their card.”

That’s palm as in hand, not tree. Though who knows? Maybe smart potted plants are next.

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TBT: In celebration of tax season and the 19th Amendment

TBT

Perhaps you heard: 2020’s tax seasons is upon us. You may also be aware that August of 2020 will mark 100 years since the adoption of the 19th Amendment, finally acknowledging women’s right to vote. It’s an issue that, like many, today makes us shake our heads to think it was ever hotly contested. It seems fitting, then, to share this post from last year.

In celebration of tax season:  How alcohol and women’s suffrage helped create the IRS

Toasting the IRS

I’m going to go out on a limb here and suggest that one of government’s brand values is not “up-to-date office equip­ment.” If you don’t believe me, ask if a PDF will do the next time your local government requests a fax. There’s a good chance the answer will be, “What’s a PDF?”

But when it comes to collecting money, the United States government keeps fairly well up with the times. In an age where our best prospects for digital payment adoptions are Millennials and younger, the folks in charge of the Internal Revenue Service introduced electronic filing way back in 1986. (Little known fact: Many working at IRS headquarters back then were not spring chickens.) Though taxpayer convenience may have been a motivator, I would suggest, at the risk of cynicism, that speeding collections and lowering costs may also have played a part.

Of course, you knew the IRS uses direct deposit. Here’s what you may not know:

The curious tale of how alcohol and the women’s movement led to the IRS

In 1913, a scant 73 years before the IRS began accepting direct deposit, the United States ratified the 16th Amendment, permitting Congress to impose an income tax.[i] Congress had already taxed incomes from time to time, but the 16 Amendment made its authority to do so official.

Ratification, however, had taken four years. During that time, the “income tax amendment” found a pair of allies who might, at first glance, seem unlikely: the Prohibition Movement and the Women’s Suffrage Movement. Indeed, passage of the “income tax amendment” laid the groundwork for Amendments 18 and 19, which, respectively, banned the manufacture, sale, import, and export of alcohol and gave women the right to vote.

It was largely women, with the support of sundry male Protestant ministers, who championed Prohibition. But before they could persuade the then all-male Congress to ban alcohol, a practical problem would have to be solved: Alcohol taxation, permitted under the Constitution as an indirect tax, accounted to a good 30 to 40 percent of the nation’s revenues. Before it could pass Prohibition, the government would need a new revenue source. Decades earlier, the Women’s Christian Temperance Union (WCTU) had already championed an income tax as the answer. Author Daniel Okrent cites it in his book Last Call: The Rise and Fall of Prohibition:[ii]

 … to those in the dry movement who understood political and governmental reality, imposition of an income tax was also an absolutely necessary step if they were going to break the federal addiction to the alcohol excise tax. This had been obvious to the leadership of the WCTU as early as 1883, when the editors of the organization’s official organ, The Union Signal, coyly asked their readers, “How, then, will [we] support the government” if the sale of liquor is prohibited? The editorials had a ready answer for their own question: an income tax, they wrote, was “the most just and equitable arrangement ever made for the equalization of governmental burdens.”

The 18th Amendment, ratified in 1919, took effect in 1920. Chances are it was not lost on members of the U.S. Congress that Prohibition might displease a good deal of men, who now had the power to vote them out of office in retaliation. This was thanks to the 17th Amendment, passed two months after the “income tax amendment,” which took the election of the U.S. Senate and House out of the hands of state legislatures and placed it in the hands of voters. So perhaps giving women the vote with the ratification of the 19th Amendment in 1920, which just happened to be the same year Prohibition went into effect, was for Congress an act of job retention as much as or more than of fairness.

Prohibition, as you surely know, was an abject failure. About 11 months after the 19th Amendment accorded voting rights to women, the newly ratified 21st Amendment repealed the 18th Amendment. Once more, alcohol flowed freely through the land. The repeal, however, wasn’t a complete reversal. Congress left the federal income tax in place. So it is that the United States Treasury is able to have its tax and drink it, too.

I for one am grateful for the 21st Amendment. The Super Bowl just wouldn’t be the same without the Clydesdales.


[i] Utah, where I live, is one of six states never to have ratified the 16h Amendment. The other holdouts are Connecticut, Rhode Island, Virginia, Florida, and Pennsylvania. If you happen to live in one of them, I recommend against letting that stop you from paying.

[ii] Okrent, Daniel. Last Call: The Rise and Fall of Prohibition. Scribner, 2011.

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Fooling sophisticated security systems with a photo

Facial recog compositeEver notice how easy it is in the movies to get the better of high tech security? 

Every secure room and prison cell has a person-size ventilation shaft covered by an easily removed grate. You can spray fog to reveal laser beams and then contort your way through. For every floor with alarm pressure plates, you can suspend yourself from the ceiling. And, these days, thieves (and viewers) aren’t squeamish about removing body parts to satisfy biometric scanners. Whoever thought we’d see Mila Kunis conceal a severed finger in a lipstick case?

Of course, those of us who know a thing or two about cyber security have the privilege of looking about the theater with a smug it ain’t that simple expression. Not even the lipstick finger would work.

But let’s give moviemakers credit. At least they weren’t naïve enough to cook up fooling airport facial recognition software by holding up a smartphone with a photo on its screen. I mean, that’s just plain silly. Even for Hollywood.

Except, well, hold Kneron’s beer.

Kneron, a San Deigo artificial intelligence company, conducted tests to see just what thieves could, in reality, get away with. As I so subtly foreshadowed two paragraphs back, Fortune reported that …

At the self-boarding terminal in Schiphol Airport, the Netherlands’ largest airport, the Kneron team tricked the sensor with just a photo on a phone screen. The team also says it was able to gain access in this way to rail stations in China where commuters use facial recognition to pay their fare and board trains.

Oops.

But then, airports and rail stations are one thing. Banking is quite another. 

Right?

I hope you’re still holding Kneron’s beer, for the same article says that …

… in stores in Asia—where facial recognition technology is deployed widely—the Kneron team used high quality 3-D masks to deceive AliPay and WeChat payment systems in order to make purchases. Those systems, which resemble the ones seen in airports, use a person’s face rather than a PIN or a fingerprint to validate user’s identity. Such masks, in theory, could allow fraudsters to use another person’s face—and bank account—to go shopping.

Oops. 

On the bright side, “high quality 3-D masks” aren’t easily come by. Kneron used masks that were “obtained from specialty mask makers in Japan. But the San Diego-based company notes the technique could be used to defraud famous or wealthy individuals.”

Also on the bright side, the masks that Kneron used could not fool the iPhone X’s face recognition system. According to PYMNTS.com:

Neither a mask nor a photograph could fool even the oldest iPhone with the technology, the iPhone X, during the test. There has been one case when the system was tricked, but Apple has attempted to patent a counterattack that would require some facial muscle movement for verification.

There are, however, are times when iPhone X doesn’t recognize the real thing. STEM-focused NFP organization Skeptoid Media’s executive director Brian Dunning recently lamented on Facebook, 

My experience has been 70% stoked with how much faster and easier navigation is on the phone, with 30% frustration over the need to type my unlock code so often as Face ID is soooo unreliable, especially when wearing winter gear.

Dunning isn’t alone. Shortly after iPhone X’s debut, Slate reported:

Unlike Beyoncé, we do not all wake up flawless—at least not according to the iPhone X. Several iPhone X–owning Twitter users have taken to the latter (probably using the former) to complain that Face ID—the phone’s facial recognition technology—fails to recognize their face first thing in the morning. Like a drunken one-night stand, the iPhone X doesn’t quite know who they are in the morning light.

For that matter, by now it’s well known that facial recognition software—all of it, not just Apple’s—has its challenges when it comes to non-white skin. Last month the Washington Post reported

Asian and African American people were up to 100 times more likely to be misidentified than white men, depending on the particular algorithm and type of search. Native Americans had the highest false-positive rate of all ethnicities, according to the study, which found that systems varied widely in their accuracy.

No wonder some iPhone users long for a return to opening their phones with a fingerprint. Except, as I posted last spring, fingerprints linked with Social Security numbers and addresses are readily available on the dark web. 

(To my knowledge, no one has retried the infamous experiment in which a thief hoped that painting his face with lemon juice would make it invisible to security cameras.)

Yet it is only by identifying flaws that we find solutions. The fact that we have facial recognition software at all—not long ago it was the stuff of science fiction—is pretty mind-boggling. The wrinkles will be ironed out.

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Patriot Act Section 215 gets a quiet reprieve

Don’t feel bad if you missed it. Some allege that that was the idea. Late last year, Congress quietly extended Section 215 of the Patriot Act by burying it in the Further Continuing Appropriations Act of 2020 “Most famously,” reported Harvard Law School’s Jolt Digest,

… Section 215 authorizes the bulk collection of telephony metadata, or call detail records (“CDRs”). These CDRs contain the time, duration, and participating numbers in a telephone call, but do not include information regarding the content of the call. Originally, after the passage of the PATRIOT Act, the NSA could store these CDRs and search them as needed.

For today’s TBT, here’s what I wrote about Section 215 in January 2015, when it was last up for renewal.

* * * 

Canaries and the Patriot Act: It’s time to let Section 215 expire

canaries-426279_640

It was once common practice never to descend into a coal mine without a canary. Canaries are more sensitive than humans to methane and carbon monoxide, which are odorless, colorless, and deadly. If the canary expired, it meant you needed to hightail it out of the mine before you expired, too.

The practice ended early in the 20th century. But now, in passive-aggressive response to Section 215 of the Patriot Act, a namesake practice known as a “warrant canary” has arisen.

Section 215 lets the FBI make any person or entity fork over on demand pretty much anything—printed matter, computer files, data, online search histories, phone records, purchases, reading habits, underwear, you-name-it. The FBI can exercise this privilege without having to show grounds or probable cause.

Moreover, if you’re issued an order under Section 215, it is illegal for you to say so.

Still, it wasn’t long before a few astute, rebellious souls noticed that Section 215 neglected to make it illegal to say that you haven’t been issued an FBI order. Suddenly statements began appearing like this one, from Apple’s 2013 Transparency report:

“Apple has never received an order under Section 215 of the USA Patriot Act. We would expect to challenge such an order if served on us.”

That statement is a warrant canary. The idea is that if the statement changes or disappears, we might reasonably infer that the warrant canary has died—that is, that an order has been issued. That is why not a few people were concerned when one year later Apple changed the statement to this:

“To date, Apple has not received any orders for bulk data.”

The qualifier “bulk” may portend a deceased canary in the form of Apple’s having received orders for specific data.

The FBI, it seems, is not a fan of loopholes. Nor does having named the loophole in question after a sweet, colorful finch appear to have appeased them. As I write, the FBI is pursuing legal action to disallow warrant canaries. Not just Apple, but the likes of Twitter, Google, others, and of course the ACLU, are opposing the FBI on this one.

I bring it up at this time for two reasons. First is that the issue has been heating up of late. Second, Section 215 of the Patriot Act is due to expire on June 1 of this year.

I hope that our elected leaders will stay their hands and let Section 215 pass into oblivion. I am no lawyer, and call me a rebel if you must, but I think that Section 215 rather flies in the face of the spirit of the Fourth Amendment:

The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no warrants shall issue, but upon probable cause, supported by oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.

Or, to put it even more succinctly: Without cause and due process, government officials cannot barge into your personal place and dig around willy-nilly just to see what they find.

Watch for this issue to escalate as June 1 draws nearer. Until then, let’s hope that the ACLU, Apple, et al can continue to—I can’t resist saying it—give Section 215 the bird.

 

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Fiserv Relieves Gas Pains

Screen Shot 2020-01-23 at 12.41.07 PMLas Vegas Consumer Electronics Show: Payment at the gas pump just got cooler

I once heard a statistician characterize Las Vegas—at, of course, a convention in Las Vegas—as “a monument to people who do not understand probability and chance.” To her point, gambling profits indeed built the town. Reno, about 400 miles to the north, was the more prosperous town until “Bugsy” Siegel convinced mobsters to finance construction of the Flamingo hotel-casino resort. That is what set Vegas on its path to becoming the Nevada gaming town.

(It was an outcome that Siegel didn’t live to see. Fellow mobsters gunned him down in 1947 for exceeding his $1.5 million construction budget by about $5 million. This is one of many reasons that applying for a construction loan with the mob is for the most part ill advised.)

Today Las Vegas bills itself as the “entertainment capital of the world,” an entirely defensible claim. For that matter, it is no stretch to deem Las Vegas the convention capital of the world. Book your convention there and you’re likely to pull more registrants than you will in other cities. A good number of those registrants will show up late and hung over in the morning, but you can’t have everything.

If you were fortunate enough to take in the Consumer Electronics Show (CES) in Las Vegas earlier this month, you emerged with exciting news for you and your vehicles.

Thanks to a joint effort between Exxon-Mobil and Fiserv, you’ll soon be able to pull up to a filling station and tell Alexa to activate a pump, as shown in this one-minute video. A recent Fiserv press release reported:

ExxonMobil and Fiserv announced that they are transforming the way people pay for gasoline using Amazon Alexa. Coming later this year, consumers with Alexa-enabled vehicles, Echo Auto, and other Alexa-enabled mobility devices will be able to say, “Alexa, pay for gas” when they pull up to the pump. This new experience will initially be available at over 11,500 Exxon and Mobil stations in the U.S.

This is no small deal for the payments industry. According to the United States Energy Information Administration, Americans burn through some 391 million gallons of gasoline daily. ExxonMobil supplies about 17.2 percent of that. With the average price of a gallon of gas in the U.S. at about $2.54 as I write, that’s a potential $171 billion in daily gasoline sales for Alexa to start tapping into.

Moreover, it appears that the market is more than ready for app-driven gas purchases. Here are some impressive stats from PYMTS.com:

  • 68 percent of adults who pay for gas with mobile apps buy it as often as once per week
  • 73 percent of users who pay for gas with mobile apps said they are more likely to visit the store again if the app experience is convenient
  • More than half (57 percent) of consumers who pay for gas using mobile apps say they would do so more often if the apps could also pay for c-store products
  • 85 percent of Bridge Millennials say that receiving discounts is the most important feature of a gas app

Another PYMNTS.com article highlights comments by Head of Global Digital Commerce Fiserv’s Nandan Sheth, who …

… told PYMNTS in a conversation shortly after the news broke that it was “big news” … for gas station operators, and a big step forward for voice commerce. But, he noted, it was also still just one of many to come  … Although many use cases could emerge, the most effective ones … will simplify the commerce experience for the customer and do that without a lot of complicated interactions between the voice-enabled platform and consumers … “There is so much power that we think will be ultimately surfaced as consumers are just becoming more used to this and more into it and more complicated uses cases start making sense to develop.”

ExxonMobil’s participation comes at an interesting time in the energy giant’s history. Just 12 years ago, the ExxonMobil announced that it would begin selling off its company-owned retail gasoline locations. Stores would continue displaying ExxonMobil branding and selling its products but be owned by independent operators. Reuters reported at the time that “sky-high crude oil prices squeeze margins” drove the decision. Regardless of who owns the stores, ExxonMobil remains a substantial player in the industry.

Also quoted in the Fiserv press release, Americas Fuels Marketing Manager at ExxonMobil Eric Carmichael said, “We’re excited to bring new technology and better experiences to the gas station. We build and seek out technology that will wow our consumers, providing both ease of use and security.”

It makes sense and, in fact, seems all but inevitable that Fiserv would lead in a payments venture of this scope. Fiserv boasts millions of business clients, including the world’s largest brands, payment networks and mobile wallets. It is uniquely positioned to support a connected ecosystem of consumers across omni-channel devices like mobile phones, connected cars, and internet of things (IoT) devices.

As I have disclosed before in this space, Fiserv happens to be my employer. I figure that from time to time I’m allowed to brag about the company I’m lucky enough to work for.

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