The Payment Systems Regulator has published a report on contactless mobile payments (CMPs). It sees this as a growth area as people become more comfortable with using it, more contactless pay-points are available and functionality improves. As a result, it wanted to be sure it understood relevant issues and the effects of the sector on its statutory objectives.
The report looks at how CMPs work, the key issues that have been raised with the PSR and its ongoing role in protecting competition, innovation and the interests of service users.
The report explains how, from a technology perspective, a key difference between CMPs and contactless card payments is the information communicated between the consumer and the retailer’s POS terminal – CMPs use a process of “tokenisation” which replaces the Primary Account Number used in contactless card payments with a device or digital primary account number (a token). This should reduce the risk of payment details being stolen during a CMP.
CMPS rely on mobile devices having an “NFC antenna”, and developers of CMP apps have unrestricted access to the antenna except for Apple device, in relation to which only Apple Pay has access in a way that can be used to make CMPs. PSR looked at whether this could be anti-competitive. Some stakeholders said the restriction had a negative impact but did not give specific examples.
The PSR also looked at whether card issuers had to use particular token service providers, and whether there were restrictions on others that prevented them from developing and offering tokenisation services. Generally, the agreed “EMV specification” was considered to work well.
Overall the PSR has not currently identified that the CMP market presents any risks to its statutory objectives but will keep this under review.