BOSTON (9/9/14)--A paper released by the Mobile Payments Industry Workgroup (MPIW) examines the regulatory landscape when it comes to mobile payments. The MPIW was instituted in 2010 by staff from the Federal Reserve Banks of Boston and Atlanta.
One of its primary goals is to examine the need for a common understanding of the regulatory environment for the mobile payments industry. This includes looking at laws and regulations that govern such payments, as well as the knowledge of mobile payment providers, relating to Bank Secrecy Act, security, compliance and transmission issues.
A mobile payment is defined as "the use of a mobile device to make a proximity or remote purchase at a retail point-of-sale, for transit, person-to-person money transfer, ticketing, online goods and services, or digital content. Mobile payments are funded via credit or debit card, prepaid account, account with a financial institution, or a charge to the consumer's mobile phone bill."
According to the group, as mobile payment solutions continue to evolve, particularly due to new technologies that include near field communication and QR codes, a "highly fragmented market" has emerged, along with new opportunities.
"Addressing security and privacy issues is critical, as the progress of the mobile ecosystem hinges on trust and transparency," the paper reads.
As more credit unions begin adopting technology such as online and mobile banking, mobile remote deposit capture and social media, the National Credit Union Administration is looking for ways credit unions can implement controls commensurate with the risks involved, especially when it comes to ensuring the security and stability of these new service delivery channels.
Marianne Crowe, vice president of payment strategies for the Boston Fed, spoke to Pymnts.com about concerns of federal regulators.
"Their concern is really trying to figure out if these examiners and staff people have the tools and the knowledge to determine if the banks and non-banks that are engaging in mobile payments and mobile banking really have the effective and right kind of risk management programs and security tools in place to make sure that these mobile payments are secure and being protected, and customer account credentials are protected," Crowe said (Sept. 8).
The NCUA recently formed a mobile payments workgroup to increase examiners' understanding of mobile banking and payments. Its goal is to create guidelines for credit union examiners to help them flag particular issues for follow-up by a specialist. The guidance is due to be released in the fourth quarter.
The Consumer Financial Protection Bureau also has rulemaking and interpretive authority for most federal consumer laws relevant to mobile financial services. The Electronic Funds Transfer Act applies to mobile banking or mobile payment transactions made via electronic fund transfers using a consumer's asset account. The Truth in Lending Act applies to mobile payments when the underlying payment is made using a form of covered credit such as a credit card.
Currently, transactions from prepaid card accounts are not covered under either regulation, but the CFPB plans to release prepaid card account regulations before the end of this year.
Use the resource link below to access the paper.