Credit card systems must be irrefutable to ensure cardholder confidence. As you purchase, data passes through the merchant, to the acquirer, then payment network and the card issuer. Everything balances along the way.
This data, at the merchant and card issuer level, carries information for each party. This is one of the reasons that governments with cash economies such as China, India, and Mexico are driving for financial inclusion. If you can identify the flow of cash, you can tax it on the revenue side and the transaction side.
For the same reason, the original Diners Club struggled with restaurants back in the 1950s. The payment card could shift undocumented cash from night clubs and expose owners to tax liability. On the positive side, buyers would be less sensitive to pricing because they could “charge it” rather than bringing mounds of cash to New York’s restaurant district.
Here’s an interesting story that highlights how far the issue has gone.
In a syndicated Washington Post article, the author makes two transactions, one with a Chase Amazon Rewards Visa and the other with the new Apple Card. The mission is to see what happens with the individual purchase of a banana, one with each card. The writer laments:
- I pored over these companies’ privacy policies. Then I asked more than two dozen to get specific about what they actually do with our transactions. What data are they sharing, and with whom?
- Some didn’t answer. Others sent me to a Bermuda Triangle of legalese where few straight answers escaped alive. In 2019, it’s hard to trust companies that don’t think they owe us clarity about data.
- What I learned: The card data business is booming for advertisers, for aiding investors and for helping retailers and banks encourage more spending. And there are many ways a card swipe can be exploited that don’t always require a transaction being “sold” or “shared” in a way that fully identifies you. Data can be aggregated, anonymized, hashed or pseudonymized (given a new name), or used to target you without ever technically changing hands.
He finds differences between Chase and Goldman Sachs’ policies.
- Chase would not tell me the specific data it shared from my card or the companies it shared it with. Instead, spokeswoman Patricia Wexler listed kinds of data Chase doesn’t share – including “personalized transaction-level data.” But that leaves room for lots of uses. Chase, for example, opts us in to receiving offers from partner companies based on our spending habits.
- This is where the Apple Card is different. In the Goldman Sachs privacy statement, its answers to most kinds of sharing is “no.” Goldman still shares information to credit agencies about whether you pay your bills. But it says it doesn’t feed transactions to marketers or a sister company that mines card data.
- Co-branded card partners get a piece of the action, too. Of course, Amazon receives data when you buy things on Amazon with its card. What about other purchases? Chase says it shares information with co-brand partners “at a high level only – not specific details around which merchant, and not specific items purchased,” but Wexler declined to be specific. Amazon also wouldn’t say exactly what it receives. (Amazon CEO Jeff Bezos owns The Washington Post.)
The author continues with views on bank issuers, card networks, POS systems, retailers, wallets, and financial apps. But the cleverness is in tracking the course of two bananas purchased at Target with two different cards.
The topic is interesting, but for me, there is a bright line between cool and creepy with credit card data. I like the taxation issue though am not sure about sharing how many bananas (or whatever) I consume.
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group
