Many mobile payment platforms allow consumers to choose among different funding sources for payment, such as a credit card, debit card, bank account, or mobile phone account.
But many mobile payment users may not realize that their protections against fraudulent or unauthorized transactions can vary greatly depending on the underlying funding source.
This is one of the key issues examined in a report released today by The Federal Trade Commission. The report, “Paper, Plastic… or Mobile? An FTC Workshop on Mobile Payments,” is based on a workshop held by the Commission in 2012 to examine the various unique issues facing providers and users in the mobile payments arena.
One survey of 1,000 financial services, technology, telecommunications, and retail executives revealed that 83 percent of those executives believed that mobile payments would “achieve widespread mainstream consumer adoption” by 2015.
FTC panelists identified three primary areas where concerns are likely to arise with the increasing use of mobile payments: dispute resolution, data security, and privacy.
Protections on mobile payments only go as far as those found at the source of the funding for the purchase made by a consumer.
Generally, credit cards provide the strongest level of statutory protection, capping liability for unauthorized use at $50.25.
If a mobile payment is linked to a bank debit card, a consumer’s liability for unauthorized transfers is limited to $50, if reported within two business days, and up to $500 for charges reported after two business days.
“However, if consumers do not report unauthorized debit transactions on their bank account within 60 days after their periodic statement is mailed to them, they can face unlimited liability, whether or not the charges result from a lost or stolen card or another electronic transfer,” the FTC report said.
Other types of funding mechanisms, however, do not have the same statutory protections as credit cards and debit cards.
For example, there are no federal statutes besides the FTC Act that protect consumers from unauthorized charges if their mobile payment mechanism is linked to “a pre-funded account or stored-value card such as a gift card or general purpose reloadable card, also known as a pre-paid debit card.”
The mobile-carrier billing platform also raises issues with regard to third parties placing fraudulent charges onto consumers’ mobile carrier bills. This practice was first identified in connection with the landline phone billing and is generally known as “cramming.”
Read the full report.