Task Force Examines Mobile Payments

House panel reviews the benefits and pitfalls of the evolving payments marketplace.

February 04, 2020

ALEXANDRIA, Va.—Last week, members of the House Financial Services Task Force on Financial Technology held a hearing on the rapid expansion of mobile of payments and the implications on the U.S. payment system and consumers.

The hearing was entitled, “Is Cash Still King? The Rise of Mobile Payments” and it was led by the Task Force on Financial Technology Chairman Stephen Lynch (D-MA) and Ranking Member Tom Emmer (R-MN). During the hearing, members of the task force weighed the benefits of the ubiquity of mobile and electronic payments and concerns about privacy and accessibly to those payments for low-income, un-banked Americans.

Many of the Republican members of the task force highlighted the promise of innovation and technology to revolutionize how Americans pay for goods. Ranking Member Emmer emphasized the need for a flexible regulatory and legal environment where innovation and entrepreneurs can thrive.

In a statement that Chairman Lynch entered into the hearing record, NACS echoed sentiments about the promise of new technology and how it could meet the needs of businesses and consumers. NACS also cautioned members that these new technologies face an immense barrier to enter the U.S. market because of the current payments security standard-setting process, where the major credit card brands set standards impacting the entire market through a closed process.

“As this task force moves forward in considering the rise and future of mobile and electronic payment systems, NACS would recommend that it carefully study the role of Visa and MasterCard in controlling payment standard-setting. The focus of standards should be to help facilitate payment security, efficiency and innovation. That is not the system we have today, but it is a future that new technology innovators have the potential to deliver,” stated NACS.

The negative impact on innovation from the dominant card brands controlling the payment system was also noted by Aaron Klein, policy director of the Center on Regulation and Markets at the Brookings Institution. He said, “China's system is unlikely to catch on in America precisely because it is more efficient. Because it does not take large sums of money from merchants at the register, it will not be able to compete with the growing high-end credit cards that come to line America's wealthy with thousands of tax-free dollars in rewards. Ironically, the inefficiency in America's payment system that has turned it into a reverse Robin Hood that contributes income inequality will block the adoption of alternative technology.”

The Committee also discussed the need for data security safeguards for mobile payments. In her opening statement, Christina Tetreault, senior policy counsel at Consumer Reports, acknowledged that as electronic payments expand, the United States needs a federal privacy law that covers all industries, particularly the financial services industry.

“The Gramm-Leach Bliley Act should not be mistaken for privacy law…Its incentives to protect consumer data from unauthorized disclose remain inadequate. Still, banks and financial services providers seek and get broad exemption from state privacy laws by claiming that GLBA protects consumer privacy. The GLBA regime does no such thing and it is time for Congress to act,” stated Tetreault.

NACS has lobbied Congress for federal privacy legislation that ensures all businesses are responsible for their own data practices and that applies to all industry sectors, rather than shifting the requirements, including those for the telecom and banking industries, onto other sectors.

In his closing statement, Chairman Lynch stated that it’s imperative to design a system that allows for innovation to thrive while protecting consumers. He did not indicate the next steps for the task force.