Consumers Union calls for mobile payment regulations

Consumers Union, the nonprofit publisher behind Consumer Reports magazine, is calling on federal regulators to take measures guaranteeing that existing consumer protections are applied to new mobile payment solutions. Consumers Union contends that while federal laws protect consumers if their credit card or debit card is lost, stolen or misused, current protections are badly fragmented and don't apply to all emerging payment platforms. The organization calls on mobile payment solution providers to offer complete consumer rights provided under existing federal law for both debit and credit cards, also providing true voluntary "zero liability" assurance without loopholes.

"Product providers and regulators need to make sure that [mobile payment systems] are at least as safe for consumers to use as traditional credit card and debit card payments," said Consumers Union staff attorney Michelle Jun in a prepared statement. "It is critical that mobile payment systems are covered by strong rules to protect consumers from losing money because of fraud, processor error or a dispute with a retailer."

Consumers Union adds that the U.S. Federal Reserve Board should apply full debit card protections to mobile payments backed via a prepaid card through Regulation E, an existing framework that establishes the rights, liabilities and responsibilities of participants in electronic fund transfer systems and preauthorized transfers from or to a consumer's account. In the event the Federal Reserve Board fails to take action, Consumers Union states that that the new Consumer Financial Protection Bureau maintains the authority to address unfair payment practices.  

Last week, Bank of America said it plans to roll out a mobile payment trial enabling customers to use their smartphones to fund retail purchases. The program, slated to launch in September and continuing for the remainder of the year, will allow selected employees and consumers in the New York area to install NFC chips in their mobile devices--to pay for purchases at participating retailers, users will "bump" their phones against point-of-sale devices that collect the relevant bank account data. The Bank of America trial will roll out months in advance of a reported contactless payment pilot spearheaded by AT&T (NYSE:T) and Verizon Wireless (NYSE:VZ). Codenamed Mercury, the m-payment trial is slated to launch in mid-2011 in markets including Austin, Texas, Minneapolis and Salt Lake City; Discover Financial Services' payment network will process all in-store transactions, and global financial firm Barclays will help manage users' credit accounts.

The worldwide mobile payments market--including purchases of digital and physical goods, money transfers and NFC transactions--will grow from $170 billion in 2010 to almost $630 billion in 2014 according to a recent forecast issued by Juniper Research. Citing growing smartphone adoption and increased app store traffic as catalysts behind the increase, Juniper also expects SMS-based ticketing schemes and mobile shopping efforts to boost the m-payments market in developed nations, while in developing regions, SMS-driven money transfers will increase at a rate of 30 percent year-over-year. Juniper adds that the top three regions for mobile payments--the Far East & China, Western Europe and North America--will represent nearly 70 percent of the global mobile payment gross transaction value by 2014.

For more on Consumer Union's mobile payment regulation efforts:
- read this release

Related articles:
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Operators targeting Texas, Utah for contactless payment trials
Juniper forecasts mobile payments to reach $630 billion by 2014