The sales pitch behind many mobile payment systems is convenience, but some companies are learning that when a payment system becomes too convenient, the backlash can last for years.

Apple Inc. is seeking approval on a settlement in a class action with parents who downloaded free mobile games for their kids — and found that in doing so, they authorized those free games to make charges to their iTunes accounts. It's a problem Apple has faced since at least 2010, and it's one that bears scrutiny as more mobile commerce systems come to market.

"The single most important element of mobile payments is security, and the Apple settlement is a perfect example of what happens when a merchant takes a shortcut to give the customer a better experience," says David Schropfer, head of mobile commerce at The Luciano Group. "Too little security, like the policies that allowed 'bait' apps to thrive and the merchant may have to write a $100 million check."

Many mobile payment systems allow users to make charges from a mobile website without typing a full card number. Some place charges on a user's phone bill. Others, such as PayPal co-founder Max Levchin's startup Affirm, use a separate charge account. Apple lets users purchase mobile content by typing the password to their iTunes account.

Apple initially allowed users to make multiple charges to the iTunes account without requiring the password each time. Companies like TapFish and Capcom Interactive Inc. took flack for offering apps that were free to download but allowed users to then purchase virtual items in the game.

Parents would hand the apps to their kids without realizing the password they typed to download the games would also allow purchases from within the games for a limited time. In March 2011, Apple updated its smartphone software, placing restrictions such as allowing parents to completely shut off in-app purchasing.

Apple plans on awarding refunds if the court settlement is approved. Any adult user who had a minor purchase "game currency" with the adult's account without permission would receive a credit or refund. Under the settlement, a form can be filled out to receive the $5 iTunes credit. All unauthorized charges over $5 can be refunded by filling out a longer claim form within 45 days. Reimbursement can occur even after 45 days if users explain the reason behind the continuance of purchases.

"This settlement manages to highlight one of the hidden downfalls of our increasingly digital and mobile world: the convenience can be used to bait consumers," says Aleia Van Dyke, an analyst with Javelin Strategy and Research.

While consumers need to take responsibility for their spending, the settlement shows that big industry players, such as Apple and Google, need to be careful to balance consumer financial needs and gamification, Van Dyke says. Acting more like a "customer's ally" could put big players in a safer position as commerce becomes quicker and more simple with mobile wallets, she adds.

"The traditional method of shopping required far more effort from people," Van Dyke says. While cutting down on purchasing time and making the shopping experience more convenient is one of the benefits of adopting a mobile wallet, this practice can also fuel impulse shopping without much thought, she says.  

Today, making a purchase can be as easy as sending a message over Twitter or typing a PIN from a pre-enrolled device.

"But each of these one-click transactions leverages convenience to ensure that a consumer has little time to think whether or not they actually want or need the item," Van Dyke says.

Though Apple, TapFish and Capcom dealt with some bad PR over their payment policies, Van Dyke says it will be difficult to identify and reprimand deliberately predatory practices and baiting.

"I don't think that Apple's practices were predatory," she says. "Rather, that convenience is a feature so valued in our society that we often forget to stop and think, 'Is there a risk to this being too convenient?'"
Schropfer says baiting could be impeded by using new credential management tools.
"Using emerging credential management tools and security standards, such as trusted service management, will be critical to balance the customer experience with security levels that will prevent bait apps, unauthorized purchases and fraud," he says. 

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