The Federal Trade Commission has released a new report on the burgeoning world of mobile payment services, “Paper, Plastic…Mobile? An FTC Workshop on Mobile Payments,” that offers guidance for the industry.
The agency focused on three areas of concern: dispute resolution, data security, and privacy.
Dispute resolution in the mobile ecosystem can be extraordinarily complicated for consumers. “Mobile payment users may not recognize that their protections against fraudulent or unauthorized transactions can vary greatly depending on the underlying funding source,” the FTC explained. Because mobile purchases are funded from a variety of sources – a bank account, a credit card, or a mobile phone account, for example – each has a different dispute resolution process with varying protections. To limit consumer confusion, companies should “develop clear policies regarding fraudulent and unauthorized charges and clearly convey these policies,” the agency recommended.
In addition, mobile phone bills present the potential for “cramming” or unauthorized charges, which are growing issues in the mobile ecosystem. Companies should provide “basic protections” for consumers, that include the ability to block all third-party charges on mobile accounts. They should also offer a clear explanation that third-party charges may be placed on an account with an explanation of how to block such charges, and they should establish clear and consistent processes to dispute charges and obtain reimbursement.
Security is a second area of concern in the mobile payment ecosystem. “Mobile payment providers should increase data security as sensitive financial information moves through the payment channel, and encourage adoption of strong security measures by all companies in the mobile payments chain,” the FTC wrote.
Finally, the agency turned to privacy. As mobile payment providers have access not only to a consumer’s financial information but other personal data on his or her mobile device, mobile payments pose potential privacy issues.
To ensure consumer privacy, mobile companies must practice “privacy by design” and provide simplified choices and greater transparency for consumers, the agency advised.
To read the FTC report, click here.
Why it matters: The staff report is just the latest example of the FTC’s attention to the mobile ecosystem. It follows an enforcement action against a mobile app provider, a report recommending best practices for app developers issued in February and a report focused on mobile applications geared toward children last December. Industry members should be prepared to face scrutiny from the agency, which has made clear its intent to regulate the world of mobile payment services. As the report promised, the FTC will “continue to monitor mobile payment options, and to evaluate whether consumers have adequate protections and the information they need to make informed choices about these new and innovative services.”