Mobile Payments: The Good, the Bad, and the Confusing

Smart phones can be used for all kinds of things these days… OK we get it…and increasingly more
people are using their phones as a mobile wallet You can pay for parking… donate to a worthy cause… or split the bill with a friend. Most mobile transactions work just fine,
but with technology constantly evolving the rules that should protect you simply
haven't caught up and government oversight isn't clear. Meet Miles. Miles is busy and likes to
pay for things with his phone. Yesterday, using his bank's mobile app, he deposited a birthday check from his grandma. Happy birthday, Miles! Normally when Miles deposits a check at his bank, the funds are available the next business day. But since his mobile deposit isn’t regulated the same way, Miles’s money may not be available for several days. Today, Miles is hanging out with his friend, Pearl. Pearl stops to fill up her car with gas. Miles offers to pitch in using a mobile app. He thinks his birthday money has already cleared. Miles doesn’t know it yet, but his bank won’t post Grandma’s check for a few more days so he actually only has $10.

That gas just cost an extra $35 in overdraft fees. Yikes! Miles, did you give the bank permission to overdraw your account for a fee? Like a lot of people, Miles doesn’t remember. And banks may not have to ask permission to overdraw your account for mobile transfers like they’re required to with debit card and ATM transactions. Next, Miles and Pearl stop at their favorite coffee shop. Miles, are you concerned about data privacy? Miles likes the convenience of mobile payments and hasn’t thought much about it.

But if he did run into problems, it’s not clear who’s in charge of protecting his data. Last stop — the record store Pearl tries to pay with her mobile wallet. But, the money is gone! Unfortunately, money stored directly on mobile wallets may not have the same protections as checking accounts. Financial institutions provide fraud protection and deposit insurance while others aren’t required to by law. Pearl, did you read your mobile wallet agreement? One tap of a finger may bind a consumer to a contract even if it is hard to read or unclear. With the right rules, Miles and Pearl’s money would be protected. Policymakers should update rules and laws to make mobile payments simple, safe, and secure for everyone.

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