In an interesting coincidence, the comment period for the CFPB’s Request for Information (“RFI”) on mobile financial services closed the same day, September 10th, that Apple announced “Apple Pay”—a new mobile wallet included with the iPhone 6 that could shake up the mobile payments landscape. The RFI, which we reported on earlier, speaks optimistically of potential cost savings for underbanked consumers while expressing concern about ensuring that consumers remain adequately protected. Director Cordray repeated these twin messages in his prepared remarks to the Consumer Advisory Board on September 11th. Director Cordray stated that “mobile devices... can make some transactions cheaper or faster or both. But we need to make sure that the legal and regulatory framework can keep up effectively...”
The RFI and Director Cordray’s comments may be a trial balloon to test whether additional guidance, or even new regulation, is needed to specifically address mobile financial services. Thus far, in addition to the RFI, the CFPB has only publicly addressed mobile financial services in the context of Project Catalyst and trial disclosures.
The American Bankers Association’s response to the RFI supported the goal of engaging the underbanked through the mobile channel, but questioned both whether mobile financial services will provide greater access to the underbanked and whether those services can be provided at a substantial discount. The ABA pointed out that the top two reasons why people do not have bank accounts is that they “don’t have enough money” or “don’t need or want an account.” The ABA also cited with approval the FDIC’s findings in an April 2014 whitepaper that providing access to mobile financial services alone may have limited success in getting the underbanked to use bank products.
On cost savings, the ABA stated that any savings to consumers from using mobile financial services would be “marginal.” There are two reasons for this. First, mobile banking, for example, is a channel that is an added service on top of all the other channels provided to consumers. Second, there are unique compliance challenges with providing mobile financial services, which could cause banks to either not provide a product through a mobile channel or to charge more for the product.
The number of merchants, issuers, and consumers Apple will bring to the table through Apple Pay means that the new iPhone 6 has the potential to further accelerate the move toward mobile payments. This in in turn could cause the CFPB and other regulators to move beyond RFIs and whitepapers in their efforts to ensure that consumers using mobile financial services are adequately protected.
