-- Millions of Americans use their phones to buy things and send money to people, but the technology involved in moving those payments in the U.S. lags behind many other industrialized countries.
Eventually, though, “real-time” mobile payments will become the standard in the U.S., said participants at a mobile payments industry conference last week in Chicago.
Connie Theien, a vice president at the Federal Reserve Bank of Chicago told the conference the feds want to get all those involved to agree on a system rather than imposing one on them. But it needs to be secure, open to everyone and fast, Theien said.
Currently, when a consumer sends money over a mobile phone app in the U.S., it can take up to four or five days for the transaction to fully clear, depending on the banks that are used. So even though the phone app might say the funds are “available” to the payee immediately, the money hasn’t actually traveled through both banks yet.
That loophole helped someone perpetrate a scam on an ABC News viewer who came to The ABC News Fixer after the scammer stole $1,800 from him using a mobile banking app.
In that case, the scammer used an app to buy concert tickets from the victim. Because of the time lag involved in clearing both parties’ banks, the scammer got the tickets and then apparently emptied out his account before the transaction finalized, just like bouncing a check.
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In the United Kingdom, Japan and other countries that already have real-time mobile payment systems, that sort of fraud can’t happen, said Peter Gordon, senior vice president for payment strategy at FIS Global, a Fortune 500 company that provides technology for payment processing.
In the U.K., for example, payments are “push only” – meaning that once Person A sends the money to Person B, the money is instantly grabbed out of Person A’s account and sent on its way.
“That’s the whole goal of this. It’s moved and it’s final. Period,” Gordon said.
FIS already has a system called PayNet, which hopes to become one of the “rails” over which billions in future real-time payments travel.
Meanwhile, several big U.S. banks have formed another group called The Clearing House, which is working on its own real-time system. It would be accessible to anyone and payments would move “near instantaneously,” a spokesman said.
Any changes are expected to take years to create and implement, however.
The Fed published a white paper in January calling this a “critical juncture” in the evolution of the U.S. mobile payments system. With so many people using phones to shop and manage their money, a faster, safer system is needed – though it could be years before that becomes the standard.