There has been much attention devoted to issues concerning the regulation of mobile payments. We have witnessed Congressional hearings, scanned white papers published by trade groups, overheard lobbyist advocacy, and read articles written by consumer groups demanding clarity. Through all this, we are no closer to clarity than we were several years ago. The regulatory landscape is as clouded as ever and confusion reigns supreme. The battle lines have certainly been drawn, but indecisiveness has paralyzed progress.

Financial institutions should take advantage of this lack of clarity to remind consumers and merchants of protections found in traditional purchase transactions. In the most recent blog of this series, Customer Relationship at Risk as Mobile Payments Mature we discussed the importance of financial service institutions' customer relationships. Perhaps, financial institutions can use the uncertainty around governance and regulation to their advantage, nurturing existing relationships and gaining ground in the mobile payments frontier.

Now, on to the battlefield….

The debates have been split between two dominate camps. The first consists of larger, established banking institutions which have always held a significant share of the payments market, while the second consists of newer participants in the market such as telecommunication providers, technology giants, merchants, and other non- traditional payment providers

The non-bank payment providers are vehement in their argument that existing regulation around electronic transactions and payments linked to credit accounts is sufficient to support any development in the mobile payment field. While they concede that a few minor tweaks may be necessary in the existing laws to accommodate newer technology, they argue that there is absolutely no need to rewrite the books, create new regulatory bodies, and mess with the incumbent framework. They cite the existing Electronic Fund Transfer Act and the Truth in Lending Act created by Regulation E and Z and enforced by the recently empowered Consumer Financial Protection Bureau (CFPB) with the passing of the Dodd-Frank Act. This alliance is even more vocal and passionate in their view that any new regulation would stifle the freedom and flexibility of innovation, limit the choices available to consumers, and stall technological advancement.

Larger banking institutions firmly support the view that the advent of mobile payments is a "game changer" and should be treated accordingly. They argue that current regulation was implemented before the spread of mobile payments and as the industry grows and evolves, the existing regulation will be unable to keep up and address some of the challenges that are surfacing as new solutions are implemented within the payments market. This group believes that the new participants must be held to the same strict standards of governance that existing financial institutions have been held to traditionally.

If the opposing views were not enough, the regulatory bodies themselves are slow in coming to a consensus. There is seemingly no collaboration between the Federal Communication Commission (FCC), Federal Trade Commission (FTC) and banking regulators, all major governing bodies within mobile payments. Payment Card Industry Data Security Standard Council (PCIDSSC) is attempting to provide industry oversight. A number of consumer interest groups such as the Consumer Union, American Bankers Association, and Smart Card Alliance are weighing in with recommendations and potential solutions. A myriad of industry groups are lobbying on behalf of different providers and Congress has displayed limited interest in taking a leadership role and providing direction in sorting out some of the issues and risks that are being identified and brought to the table.

The general indecisiveness is certainly hurting the industry. Traditional banks are slow to make investments and offer new products in an uncertain regulatory environment. Payment providers are purchasing or developing technology that may prove to be obsolete if regulation is passed that cannot be supported by chosen solutions. Most importantly, consumers are hesitant to change their behavior and embrace mobile wallets when there is so much ambiguity about fraud protection and data security. Unless some of these points of contention are resolved in the near future, the domestic growth projections of mobile payments may need to be revisited.