Could Western Union accidentally kill the prepaid phone?

By
Andrew
on April 2, 2008 12:44 PM | | Comments (973) | TrackBacks (0)

We missed something. Too much about the toy, not enough on the game.

I'm reading Alex's post about Western Union's new "send money by prepaid phone" service and I can't help but think there is an invitation for regulatory disaster here.

I've had to send money with Western Union once in 25 years, to a friend who was stuck in Michigan with maxed out credit cards from a ticket and impound lot, who needed cash to fill up his car and drive back east.

When I called Western Union, they asked me a whole bunch of questions to verify who I was. They had my addresses going back five years (even my college dorms) and I had to think back to remember my old home phone number growing up (301-229-9041) and even some details about my parents.

The beauty of prepaid phones, however, is that they offer some level of anonymity by disconnecting the phone number from an identity. This is useful for say, people who are whistleblowers or sources for journalists, or even for plain old privacy-minded people who are willing to pay a premium to not have a name associated with their phone.

Western Union, which discontinued their signature telegram service last year, now makes their money taking a cut of funds that people send using their network. Those remittances that enterprising immigrants send home (which are, incidentally a huge part of the global economy) make up a massive pool of funds. For instance, Ghana's economy recieved $4.5 Billion in remittances from abroad in 2005, a huge chunk of that country's GDP.

In the U.S. many undocumented/illegal immigrants get paid cash. They send this cash home via Western Union. No tax is paid at any point, except perhaps by WU. On the other hand, this is cumbersome because of the paper trail required. Let's go back to me trying to send $150 tp Michigan. They knew everything about me. I'm sure they collect just as much information on Joe Blow trying to send cash, because they've been an easy target for money laundering and other underhanded enterprises. They cover their butts.

Another thing, if sending money is going to be so easy domestically, isn't the Government going to want a cut, or want to watch the sums moving around from phone to phone? I'd like to see the privacy policy associated with this service. Is reloading my phone with minutes going to be as document-heavy as sending money? Will I have to fill out a form, or will I just be able to buy a "card" with cash, no questions asked? Can you see where this is going?

Now, if I buy a prepaid phone from this service, am I going to have to document myself the same way? What if this becomes more widespread? Could this new "feature" spell the end of the disconnection of number and identity?

If so, the prepaid phone market will be all but dead, except to those who have no other choice. What bothers me about it is that right now, I have a choice, and should continue to have a choice whether or not to be anonymous. I'm afraid that in their zeal to open a new market, Western Union could make it an attractive option for the Government to take that choice from me.

I hope not.

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