By Jeff Connors
May 13, 2013
I was reading the Money2020 blog the other day and came across this post by Sanjib Kalita that I found quite informative and thought I’d share with you. The post does a nice job of putting into perspective the key issues raised by the FTC report—issues that every small business involved in payments processing needs to keep in mind to stay relevant in today’s shifting landscape:
The Federal Trade Commission released a report today highlighting some of the key issues in mobile payments from their perspective. The report is titled “Paper, Plastic… or Mobile? An FTC Workshop on Mobile Payments,” and is based on a workshop held by the Commission in 2012. There were three key issues raised by this report: dispute resolution, data security, and privacy. None of these issues are new for the payments industry. However, the nature of mobile payments raises the importance and visibility of these risks.
FTC staff looked at the websites of 19 different mobile wallets. Of the 19, 15 allowed consumer to fund mobile payments by their credit cards. 7 allowed consumers to fund by directly debiting their bank accounts. 4 solutions allowed carrier billing. 7 allowing funding by multiple sources.
Dispute resolution processes are well defined for debit and credit cards. However, they are less defined for prepaid cards or gift cards. The Consumer Financial Protection Bureau is looking at extending protections on other cards to General Purpose Reloadable cards. The protections in consideration are: 1) liability limits, 2) disclosure requirements for fees and expiration dates, 3) error resolution procedures, and 4) authorization standards for recurrent payments.
Carrier billing is an even less well defined funding vehicle. Disputes for carrier billing are essentially dependent upon the good will of the carrier. There are no statutes or regulations which enable consumers and companies to set some benchmarks. For example, how could a consumer restrict billing on their account by 3rd parties?
The Federal Reserve performed a consumer survey where 42% on consumer said they were concerned about data security on mobile wallets. Given the recent news about foreign governments systematically hacking into corporate websites, this percentage could likely now be higher. The FTC report mentioned two methods of increasing data security: end-to-end data encryption, and passwords. Given the amount of personal data at risk, this area could represent a major pain point for consumers and companies alike.
The FTC mentioned two key concerns with respect to privacy: consumer ability to control what data is shared, transparency by companies about what data is shared. In general, European consumers tend to be more protective of their privacy while consumers in the US do care about it, but are more open to sharing their data with the appropriate controls and rewards. Given the value of the consumer data associated with mobile wallets, there will be greater business and financial pressure to use this data.
Mobile wallets as a category are still in their infancy. The accepted consumer norms and business practices still need to be created. The business models to create a sustainable mobile payments ecosystem remain to be proven. Government regulators such the FTC are monitoring markets in order to ensure the fairness of the systems that are created.
Source: Money2020 on Fri, 03/08/2013 – 20:35