Investigating Mobile Payment Apps

By GalTime's Consumer Watchdog Mary Schwager

Mobile Payment AppsMobile Payment AppsThey're new. They're hip. They're fast! Mobile payment apps are simple to use. They work by just waving your phone at the cash register and you can pay for your latte, your lunch and even merchandise in seconds.

There's no signing a credit card charge slip, or getting asked for identification. While that's quick and convenient, it has security expert Hemanshu Nigam worried. "None of that is required, so that's a huge security risk."

FTC Reviewing Consumer Pro's and Con's

That's just one reason the Federal Trade Commission is about to take a closer look at this growing high tech way to pay, especially what happens if someone steals your phone. Attorney Patricia Poss who heads the FTC's "Bureau of Consumer Protection's Mobile Technology Unit" is leading the charge. "One of the things we are going to look at is the authentication issue, which is how does the retailer know that's the right consumer who has that phone?"

Related: Top 3 Phone Apps for On-the-Go Money Management

Nigam adds to protect yourself; you're better off linking a mobile payment app to a credit card rather than a debit card, because it's easier to dispute purchases. "When that bank account debit is done, it's an immediate removal of money from your bank... it's gone."

That's why busy accountant Tom Osler keeps his mobile payment app account linked to a credit card and makes sure a password has to be entered before it can be used. "I feel secure that my device is locked."

Protecting Yourself
The FTC says you may want to find out the following from your mobile payment app provider before you sign up:

  • Who can you call if something goes wrong?

  • Can you dispute purchases with the mobile payment provider?

  • How can you get your money back?

  • Does the company provide protection for fraudulent transactions?

Related: The 10 Most Complained About Consumer Services

If you have a mobile payment app installed on your phone and it gets stolen, be sure to alert your credit card company, bank or phone company as soon as possible to help avoid being billed for transactions you did not make.

Privacy Issues
Another FTC concern: Who's tracking your buying habits? Is information being shared with third parties? Poss says her agency will be investigating these privacy issues. "What information is collected from consumers how is it transferred and who actually gets access to it."

Osler says so far he's had no problems using his mobile payment app. He loves the loyalty reward points he racks up, which earn him discounts toward future purchases. During tax time he barely has time to eat lunch and being able to pay his tab instantly is a huge bonus. "Just wave the bar code device and the transaction happens instantly."

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