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Apple's Passbook Will End Up Costing You

Beware of mobile payment systems. They are all gimmicks.

September 12, 2012

Over the next few days, until the new actually ships, people will analyze the device to death, reporting on whether it is as good as expected and whether it is worth buying.

The conversation will be unavoidable and will obsessively deconstruct the specific features of the phone. When all is said and done, Steve Jobs will be sorely missed as the chief tub-thumper. We'll all wonder how long this carnival can continue.

The feature I'll be following closely is the electronic wallet because I've earmarked it for nearly 20 years as the chief evil of smartphones. The e-wallet—or maybe e-purse might be a better moniker?—is the future of these phones.

Back in January, I wrote in which I expressed my fears that the phone company will own you like a slave if mobile payment heads in the obvious direction.

Now, Passbook only heightens my concern. Passbook is a virtual wallet that does much more than pay bills. Your phone will pay for your groceries and anything else you want to purchase. It will also cache all your clipped coupons and stored rewards from your shopper discount cards. Not to mention, it'll provide you with in-store deals.

Eventually, this "phone" will contain your medical records, passport, and driver's license. You can count on it.

Now, this all comes at a price. Fees will be tacked onto everything because it is so convenient. It reminds me of the initial installation of the ATM machines. They were said to be the great money-saving machine that would reduce banks' dependence on tellers. No more salaries to pay. This should have resulted in fewer fees for customers, but just the opposite happened. And now, despite the fact that all the banks operate through the exact same networks, you have to pay up to $3 to withdraw your cash. I thought these were implemented to save money; why aren't they paying us to use them?

This is standard practice when it comes to customer relations nowadays. The first question asked in company meetings is: "How can we gouge our customers more?"

So here comes Passbook—and if it isn't Passbook, it will be . I assure you it will be something.

Here is how it will work: You'll go to a big, soulless store. Your phone will have a built-in store rewards card for savings on many products. On this visit, you'll save $20 just by using it. Earlier in the week, you got a bunch of coupons in the newspaper and by email. You snapped a picture of them using your phone's camera, embedding them into the phone. When you check out at the register, these will automatically be subtracted from the bill. You just saved another $20. And you did this without clipping a single coupon.

Within a year of this feature, dot-com businesses will emerge. They will download all the coupons in the world to your phone for a fee. Think of the savings!

This model will look as if it makes up for the onerous fees required to even use the payment system, not to mention the 18 percent interest rate on the credit card, the questionable bank fees, the aggravating bank errors, and so on. In actuality, the joke is that all those savings are really just discounts on products marked up too much in the first place. It's a complex scam. But think of the savings!

One day, you will lose your phone. Now come the real savings—savings for the person who finds your phone and goes on a shopping spree before you can get the bank to kill the phone's payment system, that is.

I do not see any of this as progress.