down side, Office of Foreign Assets Control (OFAC) transaction
blocking may become more difficult because the IP address may
not be available to block. Another complication for OFAC is that
if you allow customers to make P2P payments in an open loop
environment, you will not be able to screen the recipient.
Along similar lines, you will also want to prepare for Fair
and Accurate Credit Transactions Act (FACTA) and its red flags
requirements. If your bank offers a mobile banking application,
then it must identify appropriate red flags for identity theft. You
should also develop a policy for handling lost and stolen phones.
Privacy Concerns
Mobile privacy should also be top of mind for compliance officers.
Businesses, including banks, can use a customer’s geo-location to
make location-based offers. This can include showing customers
the nearest ATM locations, welcoming them to a store, and making
offers based on the shopping aisle or the shelf they’re shopping
at. Soon you will be able to swipe your purchases as you shop
and receive a receipt as you walk out of the store.
As a result of these new innovations, consumer protection
groups, media, and Washington types are emphasizing “Do Not
Track” options, geolocation concerns, and mobile privacy. Both
the Federal Trade Commission (FTC) and White House issued
reports in late winter this year noting these as major concerns.
Several proposed bills address mobile privacy. Meanwhile, the
Mobile Marketing Association issued a guide for implementing a mobile-specific privacy policy (Mobile Application Privacy
Policy Framework) on October 2011. Stay tuned for more on this
sensitive issue. Until further guidance is provided, be wary of
implementing any innovation that requires your bank to know
or track a customer’s precise location. Or, if your bank utilizes
this service, be prepared to clearly explain to customers how you
are using it to avoid any privacy or potential unfair, deceptive or
abusive acts and practices (UDAAP) issues.
Community Development—the Mobile Advantage
In March, the Federal Reserve Board published and presented to
Congress, “Consumers and Mobile Financial Services,” a study
that your community development team may want to take
advantage of. Most “underbanked” consumers (thought to be
11 percent of the U.S. population) have a cell or smart phone.
Of those, 29 percent have used mobile banking and 17 percent
made a mobile payment in the last year. This is a significantly
higher rate than the overall population where 20 percent used
mobile banking and 12 percent mobile payments. “Unbanked”
consumers (thought to be eight to 11 percent of the U.S. population) also exhibit strong mobile usage: ten percent used mobile
banking and 12 percent used mobile payments in the last year.
The mobile world does not include a digital divide like we saw
with Internet access and banking.
The Fed believes the appeal of mobile banking for the underbanked and unbanked consumers is reduced transaction costs
and increased accessibility. Banks may find it to their advantage
to reach out to the underbanked or unbanked customers who
may have access to a smart phone but not a branch, which is
especially true for remittances. You may even get Community
Reinvestment Act (CRA) credit for your efforts.
Mobile Banking Glossary
THERE ARE CURRENTLY NO STANDARD DEFINITIONS in play for the mobile banking world, which is a result of the fact that there is no primary source for setting
standards or rules today. For example, the FDIC used one set of
definitions in its Winter 2011 Supervisory Insights, while the Federal Reserve employed different terminology in another recent
study. Here are the more commonly seen definitions:
■ ■ MOBILE BANKING—Platforms that enable customers to access financial services such as transfers, bill payments, balance
information, and investment options. It also encompasses SMS
(short message service or text messaging alerts), utilizing a
smart phone to access a bank’s Internet site as well as services
provided directly through a bank’s app on a smart phone.
■ ■ MOBILE PAYMENTS—The process of using a hand-held device to pay for a product or service, either remotely or at a
point of sale.
■ ■ MOBILE WALLET—A service that allows customers to pay via
payment instruments, such as a credit card or checking account, in their digital “wallet” without revealing their financial
information to the payee. Examples of mobile wallets existing
today include Google Wallet, Obopay, PayPal, and the Visa digital wallet.
■ ■ PERSON-TO-PERSON (P2P) PAYMENTS—P2P payments can be
from a consumer to another consumer or to a small business.
Remote Deposit Capture
Remote Deposit Capture (RDC) is a mobile product that allows
users to deposit items electronically from a remote location.
Customers can take a picture of the front and back of a check
and send the photo in lieu of the check via their mobile banking app. It is far more common to offer this tool to commercial
customers. However, more and more banks are beginning to
offer it to consumers as well. FFIEC Guidance SR09-2 provides
a good general overview of the product, although it focuses more
on business customers.
This innovative product offering requires additional regulatory analysis and implementation. First and foremost, you must
determine what liability rules apply as determined by the manner
in which the image is ultimately cleared. (Ask your vendor how
they will process the checks. It should be part of the agreement
with them.) There are several methods for processing RDC checks:
Method
ach
transaction
Ird
Image
Applicable Regulations
regulation e and nacha (the
electronic payments association)
rules
check 21, regulation cc, and
uniform commercial code (ucc)
article 3
determined by contract or, if there
are no contract provisions, then ucc
article 3
