As the number and variety of mobile payment options has increased, so has the Federal Trade Commission’s interest in the costs and benefits of these technologies. On April 26, 2012, the FTC held a day-long workshop — bringing together government regulators, industry leaders, consumer advocates, and academics — to discuss the current state of mobile payment technologies, the costs and benefits of the technology for consumers and businesses, and the legal, security, and privacy concerns raised by the technology.
The goal of mobile payment systems and applications is to allow the purchase of goods and services or the transfer of money between parties through mobile systems or applications; however, the transactions occur through various technologies. Carol Coye Benson, managing partner at Glenbrook Partners, a payment systems consulting firm, explained that mobile payment systems vary in a number of ways including (i) the technology utilized to accomplish the transactions; (ii) whether the mobile payment system can be used at a single merchant (e.g. the Starbucks payment application) or at numerous merchants (e.g., the LevelUp mobile application; (iii) how the mobile payment system is funded by the consumers; (iv) the type of security features such as a PIN or password that protect the payment system; (v) where the payment data is stored; and (vi) what entity develops and provides the application. Currently, the mobile payment industry is developing applications that use Near Field Communications (NFC). NFC is technology where electronic devices establish radio communication with each other by touching them together or bringing them into close proximity. Some examples of this technology are Google Wallet and Isis, a co-venture of AT&T Mobility, T-Mobile USA, and Verizon Wireless. However, expansion of the technology is limited by a lack of technology in phones and the lack of payment terminals at merchants that use NFC technology.
After reviewing the current state of mobile payments technology, the FTC examined the cost and benefits of mobile payment systems. Generally, it is agreed that the mobile payment systems benefit both consumers and businesses in the payment industry. Such benefits include the ease and convenience of paying through mobile devices and the ability of consumers to receive special offers and discounts from businesses they have paid via mobile device. However, some panelists expressed concern that these applications serve to dissociate consumers from their spending habits. This dissociation might result in consumers spending money they do not have.
The FTC also convened a number of panels involving the complex legal issues of mobile payment systems. One panel focused on the current legal protection afforded to consumers that use mobile payment systems. The panel emphasized that consumers maintain any legal protections that would have been in place if they had paid with a traditional payment device. For instance, if a consumer uses a mobile payment application to buy a sandwich and the mobile application debits a consumer’s checking account for the cost of the sandwich, the consumer maintains its legal rights under the Electronic Funds Transfer Act and Regulation E. The panel also discussed the issues and legal implications of direct billing by wireless carriers. Additional panels focused on broader legal issues of data security and privacy.