FTC to scrutinize contactless payment technology

The Federal Trade Commission will later this summer hold a Town Hall meeting to look at consumer protection issues stemming from the growing use of contactless devices, or pay-as-you-go systems for retail payments.

Contactless payment devices, which use radio frequency identification (RFID) technology to let users make low dollar-value purchases by holding an RFID-enabled device (such as a smart card, key fob, or mobile phone) in proximity to a reader, are increasingly available in the US at gas stations, retail stores and highway toll systems. Contactless payment technology typically uses RF technology embedded in credit cards, mobile phones, or USB devices to negotiate credit and debit transactions.

RFID technology provides obvious benefits, the FTC said. For example, the ability of producers using RFID to track exactly where in the supply chain their products are and by which retailer they were ultimately sold to a consumer has the potential to make product recalls more effective. However, there also may be costs regarding consumers’ individual privacy rights associated with it.

The FTC said it wants to study these new technologies as they mature, convening interested parties, and weighing the costs and benefits to consumers of their use.The Town Hall will explore the extent to which contactless devices and readers are being deployed domestically and around the world, along with potential benefits and risks to consumers of their use.  Topics will include:  

·          An overview of various contactless payment devices;  

·          Consumers’ understanding of contactless payment capabilities and potential risks, and the need for further consumer education;  

·          Security and privacy threats and proposed solutions; 

·          Emerging practices and technologies that may shape the contactless payment marketplace over the coming years. 

The Commission wants anyone interested in commenting on the topic to submit a request to be a panelist and to recommend other related topics for discussion. The requests should be submitted electronically to payonthego@ftc.gov by June 6, 2008. The Town Hall, which will be free and open to the public on July 24, at the University of Washington in Seattle.  

Recent studies show contactless payment options are growing, albeit slowly in some cases. Financial services researchers at Javelin recently did a study that showed contactless payment faces challenges as “there isn’t sufficient incentive for merchants and wireless carriers to make essential investments that will enable contactless infrastructure development and the evolution to mobile payments.

However, if industry-wide cooperation occurs, Javelin’s projects that 57 million consumers will be using chip-embedded credit cards to make contactless payments by 2013, which is more than double the 24.8 million in 2008 and will be bolstered primarily by expansion of contactless products into gift cards and private label cards.”  

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Copyright © 2008 IDG Communications, Inc.

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