Wireless devices are on the road to becoming the next credit card. Is your enterprise ready?

Appeared in the June 3, 2010 (Vol. 31, No. 11) issue of Voice Report

Get ready: Through a variety of technologies and processes – RFID swipes, texting key words to a specified address, or embedding credit card account numbers in SIM cards – wireless devices can substitute for credit cards, with purchase charges appearing on the device’s monthly invoice. And that has huge implications for your enterprise.

You need to stay ahead of – or, at least, keep pace with – your employees (often referred to as “corporate-responsible users” or “CRUs”) using new applications on wireless devices paid for by the company, especially when those applications may add unexpected charges to wireless bills. One such application, in wide use throughout the rest of the world but still in its infancy here, is the use of a cell phone to purchase goods and services.

If you haven’t thought of your CRUs’ wireless devices as credit card equivalents, change your thinking. Luckily, U.S. wireless carriers, merchants, credit card companies, and payment processors have not yet reached agreement on the allocation of payments and fees necessary to allow widespread roll-out of cell phones as credit cards. But it’s just a matter of time before they work through these issues.

The resolution of these competing interests in other parts of the world – notably Asia where wireless devices are widely used to make purchases – and the growing availability even in the U.S. of wireless device payment for niche products such as parking meters, suggest that the use of wireless devices to make payments for all kinds of things in the U.S. will soon be commonplace.

Enterprises are already facing unexpected charges on their CRUs’ wireless devices. Within 10 days after the devastating earthquake in Haiti earlier this year, some $30 million had been donated to relief efforts by individuals texting $10 donations from their wireless devices. A number of enterprise customers subsequently learned that some of these donations had been made via a CRU’s wireless device. Just like that, the donation had become a payment obligation of the company.

Having to address the issue after the fact created an uncomfortable dilemma: Should companies attempt to rescind contributions that were made by their employees for largely benevolent reasons even if the contributions were not authorized? Rescinding the donations or seeking payment from the employees was, given the circumstances of the disaster and the nature of the contribution, awkward at best. Most companies swallowed hard and paid the bills.

But this situation, and the ones likely to occur in the future when wireless devices are widely usable as payment devices, can be avoided by taking a couple of common sense steps:

• Negotiate the issue with your wireless carrier before any undesirable charges are incurred by your employees. Carriers should be amenable to blocking services that apply text donation or other charges if they know up front that your organization does not want to authorize such charges.

• Think about whether your company wants to authorize charges for non-telecom goods and services for which the carrier is performing billing and collection for third parties. If you don’t, make sure your contract specifies that you do not want to purchase such services and that you will not be liable for payment of such charges if the carrier fails to block them.

Note that if you do not have strong contract language that allocates to your vendor responsibility for blocking these charges, you will have to spend a lot of time and energy fighting them when they appear. And if your contract did not prohibit the charges in the first place, you will likely be on the hook for payment.

• Establish internal policies for your employees that provide guidance on the permissibility of these charges and makes employees responsible for unauthorized charges to their CRUs’ wireless devices. Fashion the policy after the one your company undoubtedly has on the appropriate use of corporate credit cards.

 Adopting an internal “acceptable use policy” for CRUs can address a number of issues associated with employee use of company owned wireless devices: prohibited activities, data security, employee obligations to report loss/theft, etc.

• If your organization decides to permit wireless devices as a payment tool, your policy can outline permitted (and prohibited) charges, just like any other corporate reimbursement policy. But as we’ve learned with other use policies for mobile devices, a policy is only as strong as the mechanism employed to enforce it. Backstop employee use policies with tools – namely, blocking of certain services and applications – either though your own mobile device management platform, or through the carrier.

• Prohibit the charges outright. Make sure your employees know that if the charges do appear on a wireless bill, they will be liable for reimbursement.

• Remember that if you don’t involve your carriers, you own the problem. Your ability to enforce a policy against employees will depend on your ability to find the unauthorized charges. If you rely on a TEM provider to perform this function, you may have to put in some extra effort to make sure the charges are caught (which, depending on your TEM contract, may require payment of additional fees).

The charges are coming. The traditional “one-two punch” of competitively procuring wireless services and aggressively optimizing rate plans during the term of your wireless agreements, while still necessary, may no longer be sufficient when it comes to controlling wireless costs. (

Andrew M. Brown is a partner in Levine, Blaszak, Block & Boothby, LLP (“LB3”), a Washington, D.C.- based law firm dedicated to the representation of large enterprise customers, including nearly half of the Fortune 100, engaged in the procurement of network services and related technologies. Andrew can be reached at abrown@lb3law.com.