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Congress Considers Mobile Payments Security

  • By Konstantine Kastens
  • Published: 2012-04-06

The U.S. House of Representatives' Financial Services Subcommittee on Financial Institutions and Consumer Credit held a March 22 hearing, the first of a three-part series, on advancements in mobile payment systems and how it might impact merchants, consumers, and financial services entities, as well as current regulatory arrangements.

Chaired by Rep. Shelley Moore Capito (R-W.V.), the House committee heard from witnesses testifying on behalf of the Consumers Union, the Smart Card Alliance, the Federal Reserve Bank of Atlanta, PCI Security Standards and MasterCard.

While lawmakers were intrigued by the prospect of shifting away from traditional cash, check and card transactions and toward electronic phone-mechanized payments, some during the hearing expressed unease over potential security risks.

"We are on the precipice of fundamental change in the way money is exchanged between consumers and businesses," said Chairwoman Capito, concluding that "we must make sure that these payments are safe and secure."

At the forefront of the discussion were chip-and-PIN technology and Near Field Communications (NFC) contactless technology. Unclear to lawmakers and industry representatives, however, is where jurisdiction should prevail for a technology that converges financial and communications services. Applicable oversight stretches across an assortment of regulators, including the Federal Communications Commission, which oversees wireless communications, the newly-established Consumer Financial Protection Bureau, and the Federal Reserve, which manages payment processing.

Also discussed were the findings of a working group, organized by two Federal Reserve banks and composed of industry participants, which identified potential security risks involved with mobile payments and offered security measure recommendations.

"It's important to note that the mobile payments industry is in a very early stage of development in this country, but the market is working properly to explore a variety of implementation alternatives and underlying technology solutions," Richard Oliver, a payments consultant and recently retired executive vice president for the Federal Reserve Bank of Atlanta, said before the committee.

The U.S. Senate Banking Committee held a similar, but less extensive, hearing March 29 that built upon the Federal Reserve working group's findings and reiterated the security concerns conveyed prior during the House Financial Services hearing.

Read the official testimony and see the archived webcasts here and here.

Konstantine Kastens is Government Relations Administrator for AFP.

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