A new Federal Trade Commission staff report examining the growing use of mobile payments encourages companies to develop clear policies on how to resolve transaction disputes or unauthorized charges, and it encourages an industrywide adoption of strong measures to ensure the security of the mobile-payment process.
The report also notes the privacy issues involving consumers’ personal information in the mobile-payment process, noting that mobile-payment providers potentially have access to a great amount of personal information stored on the consumer’s mobile device.
FTC staff in the report cite a Federal Reserve study released last year that found that 87% of the U.S. population owned a mobile phone, 44% of which were smartphones. Only about 12% of mobile-phone owners had made a mobile payment in the previous 12 months, and the most common use of mobile payments was to make an online bill payment (47% of mobile payment users). Concerns about the security of the technology were the primary reason given for not using mobile payments (42%).
A growing number of third parties have entered into agreements with carriers to place charges on mobile phone bills. However, there are no federal statutory protections governing consumer disputes about fraudulent or unauthorized charges placed on mobile carrier bills, FTC staff note in the report, which cites illegitimate charges on phone bills, or “cramming,” as a challenge with payments applied to phone bills. As with prepaid cards, consumers must rely on the terms of their mobile carrier agreements or those companies’ good will when these disputes arise, according to the report.
It’s good that the FTC, whose task is to ensure commerce remains competitive and not potentially harmful to consumers, is keeping an eye on the mobile-payments market, which has numerous newcomers to payments offering various types of applications and other products designed to take advantage of the power smartphones provide. While watching the market, the FTC also is keeping its distance, letting the market evolve naturally instead of trying to steer it in particular direction. The report’s attention to fraud and security suggest FTC staff have a good sense of the potential problems that could arise and that they are monitoring the market appropriately. In the end, the agency will have the final say in terms of whether consumers have adequate protections and information to make informed decisions.