Friday, March 30, 2012

Congress Zeroes in on Mobile Payments, but Uncertain of the Target

Mobile payments, mobile banking and mobile financial services are getting attention by lawmakers on Capitol Hill. Both House and Senate banking committees have conducted hearings in the last two weeks on the issue. More hearings are expected in the spring and summer.

At this writing, Congress appears to be in the “understanding” phase. Who are the players? What is the difference between mobile payments and mobile banking? What are the roles of wireless carriers and software providers? What are the legal protections for consumers? What is an “open mobile wallet?” How will mobile financial services affect the underserved? Is the United States behind other countries in the adoption of mobile financial services? Are mobile payments secure? What are the barriers to broader consumer adoption of mobile financial services?

Federal Reserve representatives testified at both the House and Senate hearings armed with new data on consumers and mobile financial services [link to report here found at]. The findings are clear. A vast majority of U.S. citizens has a mobile phone. Approximately 44 percent of mobile phones can connect to the Internet (i.e., smartphones). Please refer to the FRB’s report for additional statistics. Surprisingly, the underserved make greater use of mobile financial services than the banked.

Consensus emerged from both hearings about a possible gap in consumer protections when a mobile payment charge appears on a consumer’s wireless statement and not on a traditional card statement from a bank. It is unclear at this time on how Congress may address this. Mobile payment security was another popular theme expressed at both hearings. On this issue, perception may be a greater force working against mobile payment acceptance than reality. According to the FRB study, about half of the mobile phone users cited security as the reason not participating in mobile financial services.

It’s hard to tell where Congress will go next on the mobile financial services topic. The same probably could be asked of the industry itself. Players are coming and going. The banks, processors, networks, wireless carriers and device makers are competing and collaborating for this segment. I’ll check back when the next round of Congressional hearings start.

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