Article

Bringing order to the 'Wild West' of mobile financial services

Regulatory oversight will be critical to consumer confidence in the adoption of ATM-mobile services.

August 5, 2013 by Suzanne Cluckey — Owner, Suzanne Cluckey Communications

The converging interests of bankers and mobile innovators might be described as "wingtips meet flip-flops." But while they live in two very different worlds, they have at least this in common: a consumer market that, in a rapidly changing environment, has little choice but to trust in their integrity and stability.

As mobile providers crank out endless innovations and banks creak toward an inevitable re-invention, there will be consequences for the consumer — the good: convenience; the bad: exploitation; and the ugly: fraud.

There will be consequences for the exploiters and fraudsters, too, though. Banking regulators and consumer advocates are closely monitoring developments as financial and mobile services overlap and integrate and, without a doubt, will step in as needed to balance consumer interests with corporate profits.

At the first ATM & Mobile Executive Summit this September in Washington, D.C., industry members will get an insider's look at the market environment and the regulatory issues that might arise from ATM-mobile convergence.

In an Interagency Regulatory Panel at the summit, leaders from four federal agencies — the Consumer Financial Protection Bureau, the Federal Deposit Insurance Corp., the U.S. Treasury and the Federal Reserve Board — will discuss the issues that are capturing their attention now.

The panel will be moderated by University of Wisconsin-Milwaukee Emeritus Professor Jim Brown, who was director of the university'sCenter for Consumer Affairs for 30 years, and has testified on consumer-related matters in both houses of Congress.

In advance of the event, ATM Marketplace asked Brown for his take on the regulatory side of ATM-mobile convergence.

Q:In your opinion, what are the regulatory challenges facing payments innovation?

A:I believe the biggest challenges that payment providers will need to address (due to both competitive and regulatory pressures) will be to provide reassurance, ubiquity, familiarity (at least where technologically feasible), and demonstrable and convincing benefits.

Consumers aren't necessarily unhappy or dissatisfied with current payment options, and besides perhaps some "technologically-driven adopters," wouldn't be likely to migrate to innovative ways of making payments absent clear and convincing benefits.

Q:What role will the government play in regulating the payments landscape?

A:I would expect a considerable role from the government in the form of regulatory requirements for a number of reasons:

public trust in the financial services industry to act in the public's interest isn't exactly at a high point currently;
consumer need for reassurance in the safety and privacy of their payments is (and will likely continue to be) extremely high — it does, after all, involve their money; and
there's a long history of government addressing a range of economic and public policy issues through regulation of the payments mechanism, e.g., merchant behavior with respect to goods and services provided, taxation policies, even alleged criminal activity.

I would also expect there will be efforts to promote the availability of and access to the benefits that payment innovations may entail to audiences that marketplace forces would tend to deemphasize or even ignore.

To the extent that new payments means involve greater benefits for technically-savvy, more educated, and/or higher-income consumers, I would expect there will be efforts to extend those enhancements to consumers who may not fall into those categories but would still benefit from such innovation.

Q:How do you see coordination working among all the different government agencies involved in this unique regulatory environment?

A:Hopefully, it will be expansive, i.e., all-encompassing, and thoughtful. The panelists will be better positioned to address the extent and nature of any such coordination as may actually be likely to occur.

Q:How can providers increase consumer trust in payment security?

A:By adopting practice standards that reflect consumer concerns, and by not simply stonewalling regulatory efforts from government.

Many of the concerns that consumers can be expected to have are conceptually the same as (or similar to) those identified in the EFT Act 35 years ago, in subsequent regulatory updates to that Act, and in various privacy and information management enactments, although they may be arising in connection with distinctive delivery means and situations.

Q:What will the payments landscape look like in three years?

A:If history is any guide (and it usually is), the landscape will look rather similar to what's currently in place. That is to say, while it will almost certainly be "different," it won't likely be nearly as "different" as some prognosticators are saying. Remember predictions of "the cashless society" or the disappearance of checks?

Still, I expect we'll continue to see increased efforts at individualization of payments — more targeting of offers, personalized both as to individual traits and the timing of offers, seeking to attract consumers.

Jim Brown is an emeritus professor at the University of Wisconsin-Milwaukee. For more than 30 years, he was director of the Center for Consumer Affairs, an applied research unit within the School of Continuing Education at the university. Brown has testified on a variety of consumer-related matters before a number of state legislators, as well as both houses of Congress. He was an expert witness for the prevailing side in the litigation resulting in the largest civil antitrust action settlement in U.S. history [In re VisaCheck/MasterMoney Antitrust Litigation, CV-96-5238, (US Dist. Ct., E. Dist., NY) (2003)].

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photo: joe chiapputo photography

About Suzanne Cluckey

Suzanne’s editorial career has spanned three decades and encompassed all B2B and B2C communications formats. Her award-winning work has appeared in trade and consumer media in the United States and internationally.