The Financial Conduct Authority (FCA) has published a report on the findings from its thematic review on mobile banking and payment products in the UK. Our payments processing experts set out below the key findings in this report and what they mean for UK firms.
Reasons for the thematic review
Mobile banking is growing in popularity. The retail banking sector now enables everyday banking and payments to be made through a mobile device. Consumers of the UK’s largest retail banks made more than 18 million mobile transactions per week in 2013, which was twice as many as in the previous year. These services can offer consumers a convenient way to bank flexibly, save time and even money by enabling them to better manage their finances. In the light of such advantages, the FCA carried out a thematic review to determine how firms are achieving good outcomes for consumers when delivering mobile banking products.
Based on in-depth assessments on a sample of regulated institutions and discussions with market participants, below are the five relevant areas that firms should focus on to deliver good outcomes for their consumers according to the FCA’s findings:
- Consumer understanding of their legal rights and obligations
- The knowledge and understanding of key decision-makers in the business and firms
- Security of consumers' sensitive personal data and funds, and the robustness of technology to cope with changes in consumer behaviour when making payments
- Oversight of third parties and outsourced functions involved in the delivery of their products and services
- New entrants’ knowledge and understanding of the regulatory framework surrounding payments.
The FCA explains in the report that other areas of focus that were highlighted in itsinterim report, such as fraud against firms and anti-money laundering (AML), have not been prioritised in this report as it is satisfied that firms are addressing these areas.
Implications for firms and third parties
Although the FCA only regulates part of the mobile banking market in the UK, its report represents a helpful checklist to firms operating, or considering operating, in the mobile banking and payments market.
Firms operating in the mobile banking and payments market are encouraged to consider the key areas set out above, how they apply to their business and how they can ensure their mobile banking products and services are working well for consumers.
They should satisfy themselves that, as they embed the new mobile channel and plan for future development, they have appropriate controls in place to prevent consumer harm and damage to the market.
The FCA intends to carry out further work with the industry to ensure that firms have a clear understanding of the key areas identified in the report. The findings will be taken forward into supervision of firms offering or considering offering mobile banking products.
There is nothing groundbreaking in the FCA report but its findings reflect the risks and best practices that are commonly recognised in the FCA Handbook. From a legal perspective, firms implementing mobile banking and payment solutions will need to continue to have particular regard to data protection, the Payment Services Directive, AML and fraud issues, SYSC outsourcing requirements and other typical consumer law issues (such as unfair terms, plain English and treating customers fairly) that they face in rolling out new products.
Other publications and guidance into mobile banking on the international side include:
- the European Payments Council’s implementation guidelines on mobile contactless SEPA card payments’ interoperability (16 November 2011)
- the European Commission’s (EC’s) green paper towards an integrated European market for card, internet and mobile payments (11 January 2012)
- the European Payments Council’s white paper on mobile payments (18 October 2012)
- the European Payments Council’s white paper on mobile wallet payments (21 January 2014)
- the EC’s proposal for a revised Payment Services Directive.