The United States probably has the most complex financial regulatory system. Established in the beginning of the previous century, the Federal Reserve are to conduct the nation's monetary policy, supervise and regulate banking institutions, maintain the stability of the financial system and provide financial services to banks. As such, the Federal Reserve plays a major role in check clearing and the reduction in the use of this antiquated payment instrument. In a long term strategy implemented in 2003 check processing would be reduced significantly. Today the US is much less dependent on check processing... but much more than most other economies.The Federal Reserve is a complex system consisting of (amongst others) twelve federal reserve districts. Each district has regional responsibilities and the president of each bank represents the region on the FOMC (Federal Open Market Committee), where monitory policy is set. Sometimes the reserve districts collaborate with each other to produce white papers and policy guidelines.
The Federal banks of Boston and Atlanta recently jointly produced a fifty-seven page document called "Mobile Payments in the United States: Mapping Out the Road Ahead" (Read here). This document is the result of the MPIW (Mobile Payments Industry Workgroup) activities during the past fifteen months. Having been made aware of this document, I made sure that I got a copy as soon as possible. The document describe a mobile payment system based on an "open wallet" with ambitious characteristics that will make the deployment very difficult. Very few (if any) wallet deployments globally meet the required characteristics described, and it is unlikely that one will see a prototype soon. A clear preference towards using the domestic ACH infrastructure as a means to clear mobile payments is (well) interesting.
The authors indicate that lots of work still lies ahead and that it is not clear how to proceed. Also many different bodies within the US regulatory dispensation may have to get involved (According to the document this could be the following: The Fed, FDIC, OCC, NCAU as well as the Department of Commerce, the FCC and the FTC).
Regulatory guidance on the deployment of mobile payment is still years away. In the meantime, the industry will have to offer solutions complying within the existing frameworks.
3 comments:
After many years of dedicated work by mobile payment entrepreneurs and venture capatalists, mostly from the African arena with proof of concept and full deployment into numerous countries, the US had remained quietly on the back seat without any risks for more than a decade. It will be interesting to follow strategic back-door infiltration of rule setting & regulations, steadily setting "revised" international rules on this allready well proven solutions, thereby ensuring possible manipulation of revised standards to software securities as well as hardware products used in this field (such as NFC products) which could secure manipulation to the benefit of a limited number of hardware manufacturers only.
I'll admit as a banker I'm not as educated on regulations in this department as I should be, however, with more and more banks offering online account opening the regulators are facing a whole new set of objectives regarding policies. As Frans said, I believe they will struggle to keep up with the times (as usual) and as a banker I intend to push them as hard as possible in this area as I believe this is what the next generation will demand from their Bank.
I'm a bit worried that the fed is jumping the gun a bit and may inhibit innovation,I would hold off on regulation till we get a clear view of the direction mobile payments in the US will take.
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