October 28, 2013
New Portals: Established Rails
Do consumers understand that the consumer protection rules that apply to a mobile payment depend on the payment source—such as a debit or credit card—and not the portal—the mobile device? Purchasing goods and services using a mobile device appears to be a brand new way to make payments. But the mobile device is merely a new portal that leads to the same underlying rails: traditional retail payment sources.
Mobile wallet applications, whereby the consumer can access payment options through a mobile device, are typically sourced to the consumer's debit or credit card. The mobile carrier's billing option allows the consumer to charge an inexpensive product directly to the mobile phone bill. The consumer then pays that bill using a traditional method, such as a check. A Federal Trade Commission study of payment funding sources for 19 mobile providers in 2012 reports payment by credit or debit cards as the most common payment type, with 15. Next are bank account debit (7), multiple funding sources (7), then billing to a mobile carrier account (4).
It is important for financial institutions to educate their consumer customers about the rules and regulations related to traditional retail payment sources that support mobile purchases. Consumers should know about the mobile wallet, for example. Consumers can "carry" many payment sources in their mobile wallets, but they should be aware that each source has different consumer protection provisions. For example, the time periods for reporting disputes and liability limits are different. Education by banks can reduce confusion about the process consumers must follow if they experience a problem with any purchases. Additionally, education can make consumers more aware that the rules that apply to card payments, for instance, apply whether they make the payment in person, on the phone, online, or with their mobile devices.
Banks are in a critical position to be able to share their expertise on traditional retail payment sources as consumers increase their usage of the mobile device to initiate payments. How is your institution educating consumers about mobile payments?
By Deborah Shaw, a payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed
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