Legal Seminar, Denver, CO

071018 Discussion Draft

biometric, password, or swish features must be passed in order to access the payment app. This provides more robust protections. b. Tokenization means card data will not be held or even processed by merchants, thereby limiting risks for data security breaches. c. Issuing banks may not have to reissue cards so often, thereby saving some costs. d. Ultimately, these appear to be catching on because of their advantages to both parties: merchants get faster processing (and at least no greater costs, with the possibility of lowering them) while consumers get convenience and speed. A win-win. e. But note: some issues remain. Mobile payment technology makes it possible for merchants and processors to combine information from customer purchases. Privacy concerns abound. See Fonte, supra , at 116-17. C. Embedded payments. Social contexts provide cues to signal expected behaviors. When a waiter brings a folio to our table, we are expected to pay our restaurant tab by producing cash or a credit card. But this entails friction: can we reduce it? 1. “Contextual Commerce”. “Contextual commerce” is the term that has emerged to describe efforts to reduce friction by embedding payment technologies in their websites, social media, apps, etc. Often these involve linkage behind the scenes with traditional payment rails, which thus present more familiar regulatory dimensions. But they could involve stored balances in a wallet used on the social media site, which thus implicates greater complexity. This is an area to be monitored, primarily for consumer protection concerns. See generally Sean Ruff & Crystal Kaldjob, Emerging Technologies 151- 66, in E LECTRONIC P AYMENT S YSTEMS (2018). 2. “Internet of Things”. One could view the so-called “Internet of Things” as a further application of embedding payments. For example, can your refrigerator order groceries to be delivered and pay for it automatically? Innovators: Cryptocurrencies and DLT. Cryptocurrencies emerged a decade ago, but their use has increased dramatically in recent years. Governments are wary and investors are cautiously optimistic. But their practical utility is less than one might think given the media attention. Some key concerns for tax and AML compliance are presented below. V.

17