Verizon Accepts Mobile-Payment Charges On Bill. Will The Consumer Be Protected?

Verizon Wireless on Monday (June 13) officially declared that it would do what it had been refusing to for years: support mobile payments appearing on its phone bills.

Verizon went out of its way to deny that this signals the telecom giant pulling back from its ISIS mobile-payment alliance with AT&T and T-Mobile. Indeed, it trumpeted its denial in the second paragraph of its own news release. Feels sort of like the guy who walks into house and his wife says, "Welcome home," and he shoots back, "I certainly wasn't cheating on you just now, in case you were thinking that." (Second paragraph, Verizon? The telco doth protest too much, methinks.)

The denial didn't even—to be precise—refute that its affections for ISIS are cooling. "Our relationship with Payfone complements the part of the mobile-payments equation we're already working on with our ISIS joint venture," said Greg Haller, marketing vice president, Verizon Wireless. (Like Rep. Anthony Weiner complemented his marriage to his wife through Twitter interactions? Or like former Gov. Arnold Schwarzenegger complimented his wife by paying more attention to the household cleaning staff? Hey, if we're going to crack political quips, they need to be balanced political-party-wise.)

Whether or not it marks a separation from ISIS is irrelevant, especially as Google's near field communication (NFC) move might render ISIS itself irrelevant. And if it doesn't, some Euro moves might. What is clear, though, is that the willingness to post charges on the customer's existing phone bill certainly is a different strategy than ISIS has been pushing.

The specifics of Verizon's efforts are sketchy. Verizon Wireless Spokesperson Jeffrey Nelson said, "We hope to offer this service by the end of the year." It's being done through a partnership with Payfone, will initially focus on an unspecified number of unidentified retailers and will be limited to E-Commerce purchases, especially in the areas of ticketing/transportation, flowers, music downloads, games, candy and pizza, said Payfone CEO Roger Desai.

Of potentially greater concern are the level of consumer protections Verizon will put in place to protect retailers' customers. ConsumerReports on Wednesday (June 15) issued a report describing the absence of typical consumer-payment protections if the transactions are sent directly to a telco bill.

"Consumers who use mobile-payment products that debit a prepaid mobile account or send a charge to a mobile-phone account will likely only have voluntary protections from the wireless carrier's contract. It is unclear what recourse a consumer has when a payment is linked to a prepaid deposit to a wireless carrier (prepaid) or to a phone bill that the consumer pays at the end of the billing cycle, which is usually on a month-to-month basis (postpay). Interstate and international telephone services are regulated by the Federal Communications Commission (FCC), but the FCC does not have regulations on mobile payments ("non-telephone services") charged to a prepaid deposit or phone bill," the report said. "As a result, consumers making mobile payments linked to a prepaid phone account or to their postpay mobile accounts may have no guaranteed consumer protections in the event of an unauthorized transaction or error. None of the wireless carrier contracts we reviewed provided protections as strong as if a payment were made with a credit or debit card."

It's certainly a good thing that Verizon is now open to alternative methods to handle these payments. But if retail customers aren't protected better, it would be foolish for chains to support the move. After all, if customers go to Target or Walgreens and use their Verizon phone to make a purchase and the charges are incorrect on their bills and Verizon refuses to help, who do you think will lose business? What's more likely: That customers will change their phone service and pay a penalty or that they will simply stop shopping at Target or Walgreens?