Coronavirus fears lead to questionable uses of payment data
The global efforts to contain the coronavirus outbreak are leading to drastic actions that test the limits of what consumers will accept when governments and other entities use their payment data.
In China, the massive Alipay and WeChat apps are part of a government program to determine quarantines, a creative solution that nonetheless raises clear civil liberty concerns.
Alipay and WeChat Pay are widely used in China, enough to create a critical mass to help mitigate exposure between people to avoid person-to-person coronavirus transmission. People sign up through Alipay, which has about 900 million users in China, or through WeChat, which has more than a billion users.
Through questionnaires on the apps, the Health Code determines whether users have had recent travel to “hot spots.” As a result, people are assigned green, yellow or red codes when scanning QR codes at buildings or transit stations. People with green codes can move freely, yellow codes must quarantine for at least a week, and red codes mean people must quarantine for two weeks.
China has not revealed a lot of detail about how the health app works, and WeChat parent Tencent did not provide comment by deadline.
Ant Financial, the Alibaba affiliate that operates Alipay, told PaymentsSource the health service is powered by an API that’s part of the Alipay app and is in line with global pandemic prevention.
The questionnaire that feeds data into the color-coded quarantine identifier includes user consent forms and is self-reporting. And Ant’s contribution to the health app is limited to coronavirus protection.
In a statement, Leiming Chen, Ant's general counsel, said: "Ant Financial requires that all third-party developers, including those who offer health code services using our technology platform, strictly adhere to our data security and privacy requirements, which include obtaining user consent before providing services. Ant Financial and all its partners and third-party developers also must abide by the relevant laws and regulations to ensure the appropriate collection, use and protection of data."
The Chinese government engaged with Chinese law enforcement on the health service, according to The New York Times, and is sharing data with the government. The Chinese government is already tracking payment transactions at pharmacies and other health care centers as part of its coronavirus response, so the new color-code feature raised additional privacy concerns. The Chinese government has countered local critics by stressing the health color code app is being used only to battle the virus, and other information is discarded.
The Chinese health app shows the power, and limitations, that come with emerging retail technology.
As checkout-free stores, e-commerce and omnichannel shopping advance, troves of new data are produced. In some cases this combines video and digital trails of purchases along with other personal information that’s in a mobile wallet. As mobile wallets become part of digital ID, it becomes easier to tie a payment account to a government ID and access to transportation networks and business facilities.
The ability to quickly obtain information that addresses all of these touchpoints can be put to work in an emergency, but also opens the door to greater surveillance powers.
After years of having a poor reputation for government surveillance, China has made some progress in data privacy. But China’s overall handling of the coronavirus has been mixed at best, so any use of payment data as part of the recovery will require the fintechs to balance privacy concerns with the ability to help isolate hot spots via mobile apps.
“While there are limitations and civil liberties issues, payment data could be useful in managing a pandemic of a potentially lethal disease,” said Eric Grover, a principal at Intrepid Ventures. “Knowing an individual made payments at the physical point of sale in a hot zone would alert health care authorities to a level of risk.”
But the knowledge isn’t absolute, creating another problem as not all payments at health care facilities go toward medical supplies or medicine.
“Knowing somebody made a payment in a pharmacy wouldn’t be useful unless you knew what they’d purchased, unless you had the [product identifier], which is available but isn’t always passed on to the processor, network and issuer,” Grover said.
There are opportunities to use payment data to benefit the public during a crisis, without a major risk to consumer privacy. For example, fleet card and health care payment provider WEX used its Connect app, which helps truck drivers find the best price for gas on the road, to determine which areas were without power after Hurricane Sandy. Since the app used driver data, it could see which spots drivers were avoiding due to power outages.
But other companies' uses of data have led to strong backlashes. In one example, Target determined a high-school-age girl was pregnant based on her purchases, and tailored its mailings to that effect — much to the surprise of the girl's father, who complained about Target sending his daughter coupons for maternity items, The New York Times reported in 2012.
In addition to raising privacy concerns, the coronavirus is altering the course of other aspects of the payments industry.
Supply chains have been affected by fears over which products could carry the virus, and this panic could put damper on future B2B payment flows. Those issues could, in turn, generate opportunities for merchant credit providers, but also creates a reason to ease terms of that credit.
Payoneer is “exploring” an expansion of its working capital service to help sellers keep a steady flow of funds during this slow period, and is working with its global network of sellers, manufacturers and infrastructure partners to look for opportunities for cooperation, discount fees, new routes and sourcing, said James Huang, regional vice president of greater China for Payoneer. Many sellers are in a cash crunch with inventory down but overhead costs unaffected, he added.
“Marketplaces have been enacting policies to protect sellers from logistics delays, mitigating against negative feedback due to shipping,” Huang said, adding other marketplace strategies include subsidizing handling fees and waiving penalty feeds for refunds, which are also on the rise.
Today's challenge is less around being reactive at a macro level, but being reactive at a micro level. People have been trained to expect that, and companies need to use advancements such as AI to meet that level of expectation, said Brian McGlynn, vice president of commerce at Coveo.
“Knowledge is power. The more intelligence an organization has into the entire B2B customer life cycle, the better they are able to adapt in real time to market crises like this," McGlynn said. "Whether it’s making sure content is relevant and up-to-date, empowering your employees with the right information or providing the appropriate post-purchase support, the customer life cycle is critical for B2B organizations to understand. Right now, those without that visibility are ill-prepared for this crisis.”