Technology, Payment Service, Carrier Industries Face Heap of Issues Before Advent of Mobile Payments
The number of entities involved in transactions processed in the mobile space raises many concerns and issues about oversight, consumer protections and privacy as electronic payments move toward a sophisticated mobile payments system, technology policy experts said Friday on Capitol Hill. Consumer protections already exist in the traditional payment world, said Mark MacCarthy, Software & Information Industry Association vice president. “Liability of unauthorized use is limited” for credit card account holders, he said at an event by the Advisory Committee to the Congressional Internet Caucus. However, there are carriers, payment card companies and other entities involved when it comes to mobile payments, he said.
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The Consumer Financial Protection Bureau has a team that works on aspects of mobile payments oversight, said Mark Egerman, CFPB policy analyst “We have some exclusive jurisdiction, shared jurisdiction … and some areas where we're not sure who has jurisdiction.” There are concerns around how transparency of pricing will be handled, he said: This “can be hard with small screens.” Consumers need the ability to check balances and understand dispute resolution practices, he said. Trust is difficult “when you have a large and vibrant ecosystem of new actors and entrants.”
Regulators must determine if side agreements to promote specific products should be allowed, Egerman said. If a company suggests the best card for a consumer based on their use and balance and the wallet has a promotion agreement, that will be a transparency issue, he said. Another concern is companies that may try to have exclusive deals with transit systems, he added: “If you live in a metro region where only one wallet works on your metro system, it structures your incentives in a different way.” This set-up hurts consumer choice, he said.
Uncertainty around a lead agency to ensure consumer protections will be problematic, said Suzanne Martindale, Consumers Union staff attorney. People will expect their carrier to take care of a dispute, she said: “They'll tell you to go to the third party that put it on your bill and then the run-around starts.” The FCC doesn’t seem to think that it has jurisdiction or that unauthorized transactions are covered by anti-cramming rules, she added.
There are different types of mobile payments systems that will replace how consumers make electronic payments today, said MacCarthy. Phones can be outfitted with a chip and wireless transmitter that lets a consumer hold it to the receiver and transmit payment information, he said. Eventually, there will be payments in the cloud, he said: The idea is “you can use your phone or other device … enter a PIN and a transmission will take place in a remote server,” which downloads payment information. Having many parties involved to make one transaction occur raises platform issues, he said. To use a mobile payment system, “you need permission from a large number of entities,” like the hardware manufacturer and operating system provider, MacCarthy said. “Should they have access” to account information? he asked.
Ease of use, authentication and automatic receipt integration are some key components of a digital wallet that will be of use to consumers, said Robert Atkinson, Information Technology and Innovation Foundation president. There should be an option to have anonymous transactions in the same way that cash is used, he said. An intergovernmental mobile payments working group should be created “to move this forward quickly,” he said. “We have to recognize that this has better security than a [traditional] wallet.” Privacy isn’t absent from the current regulatory structure, he said: “We already have a regime that works and we don’t need to re-invent the wheel.”
There are conflicts that will keep mobile payments from moving forward rapidly, said Steve Mott, CEO of BetterBuyDesign, a payment system consulting firm. He said the U.S. “has no natural business model for carriers and banks to work together.” The cost and liability in the payment industry is offloaded to other parties, he said: The near-field communication option is “dead on arrival as far as merchants are concerned.” Europay MasterCard and Visa cards in their current forms won’t be widely supported, either, he added: “It keeps merchants paying onerous payment card industry compliance costs.”
While there are existing protections under federal law for debit and credit card accounts, none exist for prepaid cards, said Martindale. If someone’s phone is open or unlocked and it’s stolen, “I don’t know if you're going to get your money back,” she said. Sensible rules of the road are critical to shield consumers, especially the “underbanked,” she said: “We really don’t want to see this opportunity be squandered where we're providing financial access to new audiences, and yet those same audiences are the ones most vulnerable to lose their money.” Pre-paid accounts are “like cash” and shouldn’t be regulated like credit card accounts, Atkinson said: If they are, “it'll just raise the price of pre-paid cards.”