After Consumers Finally Start Using Mobile Wallets, Get Ready For The Regulatory Thicket

There's no standard technology model for doing mobile payments—choose from near-field communications, QR codes, cloud or a player to be named later—and that's a problem both for consumers and government regulators, reports PaymentsSource.

"The compliance strategies for mobile payments are still all over the map," said Kumail Tyebjee, a vice president at mobile payments consultancy Mphasis. Standards groups "are telling everyone to make sure they are addressing data protection for mobile payments, but there is still no standard on how data is being dealt with in payments."

That's not quite true—PCI standards still apply to Visa (NYSE:V) and MasterCard (NYSE:MA) transactions when mobile devices are used. The problem is that PCI hasn't certified hardware or software that meet its standards. The PCI Council did release mobile payment guidelines in February, but they're less a roadmap than notes on a set of insurmountable hurdles for retailers.

Once the process leaves the retailer's POS system, things don't get clearer. In the U.S., along with PCI, regulations come from the Consumer Financial Protection Bureau and others from parts of the Dodd-Frank Act. Dozens of new rules are already in the pipeline, covering mobile payment, person to person transfers and remittances.

In addition, the Federal Reserve also regulates payments, the Federal Trade Commission regulates consumer products, the Federal Communications Commission regulates the phone industry, the U.S. Treasury Department's Financial Crimes Enforcement Network regulates money transmitters and several different federal agencies such as the FDIC are involved in insuring consumer bank accounts—all of which may be parts of the mobile payments process. And that's before state regulators who, in 48 states, also require licenses for businesses that transfer money, something that many mobile-payments startups have neglected in the past.

None of the regulatory issues are showstoppers for mobile payments—so far, consumer acceptance has been the biggest hurdle. But PCI and regulatory compliance are guaranteed to keep the mobile-payments target moving well after consumer use finally reaches critical mass.

For more:
- See this PaymentsSource story

Related articles:
Keep Walmart Out Of Payments, Bankers Tell Fed
European Union Investigating MasterCard
PCI's New Mobile Guidelines Acknowledge Huge Hurdles

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