Page 20 - Consumers and Mobile Financial Services 2014

12 Consumers and Mobile Financial Services 2014

Box 3. Mobile Wallets and Consumers
In 2013, mobile point-of-sale (POS) purchases use of mobile wallets as they do to any financial
tripled in usage from the previous year, with 9 per- activities they perform on their smartphones or com-
cent of all adults in the U.S. and 17 percent of all puters. Basic security steps people can take to pro-
smartphone users having made such a payment in tect themselves include password-protecting their
the past 12 months, according to the Board’s sur- phone, using security (antivirus, anti-spyware) soft-
vey. Many of these mobile POS purchases were ware, avoiding opening e-mails or texts from
executed using a “mobile wallet” that stores pay- unknown senders, and being mindful of the encryp-
ment card information. tion and authenticity of any wireless networks
they use.
What Is a Mobile Wallet?
Payments made using a mobile device that seem
Although no consensus definition of what constitutes quite similar to consumers may, in fact, carry with
a mobile wallet yet exists, it can be thought of in them fairly different consumer protections depending
many regards as similar to a physical wallet. Pay- on how they are funded. When the payment is
ment cards from the mobile wallet can be used to funded using a credit card, for instance, the con-
complete a purchase at a store. However, rather sumer’s liability under federal law for unauthorized
than presenting a physical card to the retailer, a transactions is limited to $50. If a mobile wallet pay-
mobile wallet presents the payment card information ment is made using a debit card, on the other hand,
electronically through a mobile phone. Mobile wal- the consumer’s liability for unauthorized transactions
lets also commonly store loyalty cards, rewards pro- under federal law can vary depending on when the
grams, discounts, and coupons, and automatically consumer notifies the financial institution and
present them when using the phone to make pay- whether the unauthorized transaction involves the
ment. loss or theft of an access device. In contrast to debit
or credit card payments, if the mobile wallet pay-
Using a mobile wallet may appeal to some consum- ment is charged to a pre-funded account, gift-card,
ers because it can replace the need to physically or general purpose reloadable card, the protections
carry different payment or membership cards. are different still. Federal law provides no limit on
Accessing discounts and coupons that are exclu- consumer liability, except for payroll cards and elec-
sively offered to mobile wallet users may be another tronic benefit cards containing certain government
attraction, as is the potential to streamline the benefits. (While not required by law, some compa-
checkout process.
nies who issue debit cards or pre-paid cards offer
consumers additional protection in their usage con-
Considerations for Using Mobile Wallets
tracts.) Because of this variation, the protections
As mobile wallets and mobile POS payments are against fraudulent or unauthorized transactions that
relatively new technologies, consumers appear to cover consumers when using mobile devices to
have questions and concerns about the security of make payments differ depending on the method of
these services, as reflected in the Board’s survey. payment ultimately used to fund the particular
Consumers should apply the same cautions to the transaction.

payments usage are much higher when asked about (59 percent). The next most-common activities
each of these activities individually. reported by mobile payment users—at 39 percent
each—are paying for a product or service at a store
Among all smartphone owners, 30 percent made an and transferring money directly to another person.
online purchase using their phone in the past Almost 30 percent received money from another per-
12 months, 24 percent paid bills online, 17 percent son using a mobile phone, while 13 percent made a
paid for a product or service at a store, 15 percent payment by text message, and 9 percent paid for
transferred money directly to another person’s finan- parking, a taxi, or public transit using their mobile
cial account, and 12 percent received money from phone.
another person. Far less common was making a pay-
ment by text message (5 percent) or paying for park- Mobile payments are most commonly funded using
ing, a taxi, or public transit (4 percent). debit cards (54 percent), credit cards (42 percent),
directly from a bank account (40 percent), or from an
Focusing only on those who reported that they had account at a non-financial institution such as PayPal
made a mobile payment in the past 12 months, the (9 percent). Only 5 percent of mobile payment users
most common mobile payment activity is paying bills report that they used a general purpose prepaid card,
(66 percent), followed by making online purchases and 4 percent had the charge directly applied to their
33 444