Good afternoon, and thank you for inviting the Financial Consumer Agency of Canada to participate in this interesting and important discussion.
Your interest in studying digital payments is most welcome and timely to those of us who work on financial consumer issues.
Before I describe our research into this emerging area, I would like to give you a brief overview of our agency. The federal government created the FCAC in 2001 to provide financial information to consumers and to oversee the market conduct of banks and other federally regulated financial institutions.
Since then, our mandate has expanded to include responsibility for advancing Canadians' financial literacy.
In addition, we were recently given the mandate of conducting research to monitor and evaluate emerging trends and issues that may impact consumers of financial products and services.
Last December we released a research report entitled, “Mobile Payments and Consumer Protection in Canada”. This report explores the emerging technology of mobile payments and assesses the extent to which financial consumers in Canada are protected in using them. For your perusal, you have been provided with the report's executive summary, which includes a link to the report in its entirety.
Mobile payment is made with a smartphone or another mobile device instead of a more traditional payment method, such as cash, credit, or debit. Many of the current and future offerings will allow consumers to use credit and debit cards as a source of funds for their mobile payments. This topic is of particular interest to us, considering that Canadian consumers and the Canadian market are recognized internationally as being well positioned for the successful adoption of mobile payments.
Our report concludes that while mobile payments offer great conveniences and benefits, they also pose potential risks to consumers.
Currently, consumer protection obligations vary based on the underlying source of funds, as well as the type of service provider offering the m-payment service, and that applies to disclosure, dispute resolution and redress mechanisms, and protection against fraud and misuse of assets.
There are also emerging consumer protection risks, including that malware and other malicious software may present risks of identity theft and fraud. In addition, mobile service providers may sell their user data to third parties, who may use this data to target advertise—this practice is known as profiling—based on behavioural and geographical information.
One of the associated risks here is that there is a potential to market harmful products to vulnerable consumers, including children. As a result, there is a need for educational materials to help consumers learn more about mobile payments, not only to inform their decision-making but also to provide them with measures that they can take to minimize their exposure to risk. FCAC is currently developing such materials, which should be available on its website later this spring.
Our research also identified some lessons learned from jurisdictions that have high rates of user adoption. For instance, the number of stakeholders involved in mobile payment transactions may increase the level of confusion and complexity related to dispute resolution and redress. This has been identified as yet another potential risk to consumers.
In response, jurisdictions such as South Korea have enacted legislation that attributes ultimate responsibility to the financial institution for handling dispute and redress, regardless of which service provider is responsible for the error. For its part, the OECD is promoting the creation of minimum protection standards to be applied uniformly across mobile payment systems.
It will be important to monitor the business practices of suppliers to understand whether, and to what degree, the uneven consumer protection framework is problematic for consumers.
FCAC will continue to monitor the evolution of these payments and will encourage Canadians to learn more about their rights and responsibilities when they are making mobile payments through the information that we will make available to them.
Thank you. I look forward to answering any questions you may have on the subject.