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FDIC warns of entrepreneurial companies in mobile payments
- Kevin Christensen
In its winter edition of Supervisory Insights, the FDIC examines the evolving mobile landscape, concluding that two industry predictions in particular appear to be well-founded. Those predictions are: 1) a three-to-five year timeframe before mobile payments achieve marked consumer adoption, and; 2) only a limited number of mobile payments models will exist in the marketplace.
Many financial institutions wisely are not willing to wait five years before exploring the alternatives for their customers. Smartphone adoption has grown astronomically, creating a demand for mobile banking options from even older-generation customers. Mobile payments is a natural outgrowth of mobile banking.
Community banks and credit unions understand that to remain relevant tomorrow, they must innovate today. Therefore, the FDIC is encouraging FIs to practice diligence when rolling out some of these newer technologies:
As is the case with any new product offering, a financial institution should have a review and approval process sufficiently broad to ensure compliance with internal policies and applicable laws and regulations. However, unlike most banking products that allow institutions to control much of the interaction, mobile payments require the coordinated and secure exchange of payment information among several unrelated entities. Making matters more challenging is that much of the innovation in the mobile payments marketplace is driven by entrepreneurial companies that may not be familiar with supervisory expectations that apply to banks and their service providers.
At Shazam, we're familiar with supervisory expectations, since we are regulated similarly to an FI. So, when we developed our mobile app, Shazam Bolt$, we ensured that it would meet all requirements. Further, we drafted a risk assessment document that can help FIs ensure that in implementing a mobile app, they're meeting regulatory requirements, as well.
The FDIC article underscores the value of working with long-time, trusted partners on your FI's mobile initiatives. As your teams research mobile products, consider beginning with those vendor partners with whom you already have an established relationship.
Stay tuned to this blog; my next post will explore risk assessment in more detail.
Reprinted from the Shazam Network blog by permission.
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