FTC issues report on mobile payment security, privacy

March 8, 2013

Almost a year after holding a workshop on mobile payments, the Federal Trade Commission has issued a staff report on the issues it believes consumers and companies are dealing with when adopting mobile payment services. The report, like the workshop, is entitled "Paper, Plastic … or Mobile? An FTC Workshop on Mobile Payments."

Participants in the workshop, which was convened on April 26, 2012, in Washington, D.C., included industry leaders such as Ben Milne, CEO of Dwolla; Ryan Hughes, CMO of Isis; and Bradley Greene, senior business leader for mobile products at Visa. Academics and consumer advocates such as Michelle Jun, senior attorney for Consumers Union, and Sarah Jane Hughes from the Maurer School of Law at Indiana University also participated.

The FTC report highlights three areas of concern for consumers when it comes to mobile payments, and offered several recommendations to mitigate them.

First, the report encourages companies to develop clear policies on dispute resolutions when dealing with fraudulent or unauthorized charges. Some mobile payment methods such as direct carrier billing have looser consumer protections than those tied to debit and credit accounts, and the FTC said those differing protections create a potentially confusing landscape for consumers.

The FTC's report specifically highlights the risks of direct carrier billing and the potential for "cramming," which is the practice of placing an unauthorized charge on a mobile phone bill. That topic will be discussed at an additional roundtable to be held in May, the FTC said.

The FTC report also encourages the adoption of an industry-wide effort to provide security for consumer payment data and personal informatoin throughout the mobile payment process.

And finally, the FTC report contends that companies need to ensure that privacy practices, consumer choice and transparency are built into their products. The report notes that mobile payments potentially consolidates a significant chunk of consumer data including not only financial information but also location, contact information and personal data stored on a mobile device. The report recommends that building in privacy protections would engender consumer trust.

Jason Oxman, CEO of the Electronic Transaction Association, an industry group representing the payment industry, said a great deal has changed in the mobile payment space to address the FTC's concerns since the workshop was held last year.

"As the Commission staff correctly notes, the mobile payments space is dynamic and innovative, and consumers are benefitting from a range of secure, convenient and rewarding mobile payment options in the marketplace," Oxman said in a statement. "In the nearly one year since the FTC staff held the workshop on which this report is based, much has been accomplished: Our industry today provides merchants and consumers access to a wide variety of safe and reliable mobile payments products and services."

Oxman said that the industry, through the ETA Mobile Payments Committee, has come together to develop best practices and educational material for consumers, merchants and policymakers regarding mobile payments.

"(T)he Mobile Payments Committee will continue to work with the FTC and other government and industry partners to ensure that data security, privacy and other important consumer protections remain a focus as innovative new mobile payments technologies are deployed to meet the consumer demand," he said.

Visit the FTC site for a copy of the report.

Read more about regulatory issues.

Topics: Regulatory Issues , Security , Trends / Statistics

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