The Future is Calling

A Consumer Guide to Mobile Payment Systems

CALPIRG Education Fund releases a new report titled explaining how mobile payment systems work while providing consumers with the information they need to best utilize mobile payment systems in a safe and secure way.


CALPIRG Education Fund

Executive Summary

Businesses constantly look to provide consumers new and easier ways to shop. In addition to cash, checks, and credit cards, consumers across the U.S. will increasingly be able to shop and purchase new products using mobile payment systems on their smart-phones and mobile devices. A poll of 1,000 financial services, technology, telecommunications, and retail executives revealed that 83 percent of those executives believed that mobile payments will “achieve widespread mainstream consumer adoption” by 2015.[1] Mobile commerce in the U.S. is expected to reach $31 billion by 2016, roughly 7 percent of overall electronic commerce sales.[2] While mobile payment systems today present a new world of opportunity for both consumers and business, they also come with some risk.

American consumers are increasingly finding more merchants providing access to mobile payment systems. Today more than 125 million Americans own smartphones, more than 54 percent of the total mobile phone market.[3] The increasing prevalence of smartphones and mobile devices is a key driver for business to adopt new mobile payment systems.

Risks to consumers, unclear rules

As with many new consumer products, the development of mobile payment technology has outpaced the law. Today consumers are familiar with a variety of payment options and associated consumer protections for credit cards, debit cards, checks, and cash. As new technology advances, consumers must have access to the information necessary to make smart financial choices. In a survey, over 90 percent of respondents said they would make a mobile payment if they knew it was secure.[4] The Federal Reserve found that while 87 percent of the U.S. population owns a mobile phone (half of which are smartphones) only about 12 percent of mobile phone owners had used mobile payment services. Concerns revolving around the security of the technology were the primary reason given for not using mobile payments (42 percent).[5]

The introduction of mobile payment systems is proving to be a paradigm shift, with new payment systems challenging old regulatory frameworks. For mobile payments to catch on, consumers must understand the true security concerns surrounding mobile payments and learn the proper ways to keep their finances safe and secure. With the specter of both fraud and financial theft looming, CALPIRG Education Fund set out to answer the following key questions to help consumers use mobile payment systems on their wireless devices with confidence: Are payments secure?  Are the relevant dispute processes clear? And what is the state of consumer privacy with mobile payment apps?

This report provides consumers with the information they need to best utilize mobile payment systems in a secure and safe way and concludes with recommendations for policymakers to strengthen consumer protections in the future.[6]

Mobile payments, the Pros & Cons

The key advantages provided to consumers include the following:

  1. Mobile payments make it easier for consumers to shop while using their personal mobile devices, easily selecting different cards and coupons for different transactions, thus maximizing rewards and card benefits.
  2. Mobile payment technologies leverage built-in security features on the device and account identifiers to more effectively verify the consumers’ identity to provide more secure transactions.
  3. Mobile payments made using a credit or debit card account maintain the same level of consumer protections associated with those cards by existing laws and regulations.

The key disadvantages of mobile payment systems for consumers include the following:

  1. Questions arise as to who maintains control of the data created during transactions. New mobile payment systems make it easier to aggregate separate data to identify consumers, to frame shopping patterns, and to share sensitive consumer data (such as location, gender, shopping habits, and social background) with more businesses.
  2. New mobile payment systems blur the traditional relationships and responsibilities between wireless service provider (AT&T or Verizon), mobile payment system providers (ISIS or Google Wallet), and financial institutions (banks and credit card companies).[7]
  3. There is the risk that technological barriers will limit interoperability between closed ecosystems, which will restrict consumer choice and increase costs.

Policy recommendations:

For policymakers:

  1. As the law now stands, it is not clear how mobile payment system providers themselves should safeguard consumer data. Policymakers should ensure that the introduction of new technologies to the marketplace does not circumvent hard-won existing consumer protections.

For regulators:

  1. Regulators should clarify the role and liability mobile payment service providers hold towards consumers in regards to privacy and financial protections.
  2. Regulators should prohibit the use of consumers’ information collected for the purposes of completing financial transactions and fraud prevention for other purposes, especially marketing purposes.
  3. Regulators should urge mobile payment service providers companies to employ necessary security measures to protect consumer’s sensitive financial information from loss or misuse.

For Business leaders:

  1. Mobile payment service providers should pro-actively provide consumers with clear information regarding consumers’ financial liability and provide them with a toll- free customer care phone number to contest charges.
  2. Mobile payment service providers should implement mandatory safeguards to protect consumer data from unauthorized access.
  3.  Mobile payment service providers should adopt three principles in their practices: “Privacy by design” , context-based privacy choices, and full transparency in communicating what data is collected from consumers, who it is shared with, and how it is used.

For Consumers:

  1. Associate credit cards with mobile payment apps to ensure the highest level of financial protection.
  2. Alternately, consider loading a pre-paid debit card with limited funds for small purchases.
  3. Remember to enable password protection on your mobile device, especially for all financial apps.
  4. Bring disputed charges and other complaints to the attention of the card issuer as you would with a normal use of your credit or debit card.
  5. When a device with a mobile payment app is lost or stolen, contact the mobile payment service provider to disable the app to prevent unauthorized access.
  6. To protect your privacy, be aware of what you are buying and how you pay for it. Remember mobile payments (like most non-cash transactions) are being tracked and monitored.



[1] Financial Execs Survey: Mobile Payments Going Mainstream by 2015, Jason Ankeny, July 13, 2011, available at


[2] Mobile Commerce Forecast: 2011 To 2016, Sucharita Mulpuru, 17 June, 2011.

[3] Nielsen: Smartphones Used By 50.4% Of U.S. Consumers, Android 48.5% Of Them, Ingrid Lunden, Techcrunch, 7 May, 2012. Accessed online at:

; And ComScore Reports December 2012 U.S. Smartphone Subscriber Market Share, 6 February 2013, 2013. Accessed online at:

[4] Mobile payment security concerns put brakes on m-commerce market, Christopher Brown, 17 March 2011. Accessed online at:…

[5] Consumers and Mobile Financial Services, Board of Governors of the Federal Reserve System, March 2012, available at

[6] To note, this report focuses on consumer facing mobile payment systems and not mobile payment processing systems such as “Square”, “PayPal Here”, or “Intuit GoPayment”.

[7] Mobile Payments A study of the emerging payments ecosystem and its inhabitants while building a business case, Cherian Abraham. Accessed online December 2012 at: