March 29, 2012


WASHINGTON – Today, Senate Banking Committee Chairman Tim Johnson (D-SD) held a hearing entitled “Developing the Framework for Safe and Efficient Mobile Payments.”
Below is Chairman Johnson’s statement as prepared for delivery:
“Good morning.  I call this hearing to order.
“Today’s hearing, Developing the Framework for Safe and Efficient Mobile Payments, is an opportunity for the Committee to learn about the growth of mobile payments and the current framework of rules this market operates under.  Our jurisdiction extends over all financial services and payment systems regardless of the company that delivers the service.  That is why the Committee needs to make sure there are no gaps in the rules, so that this emerging market is safe and efficient. 
“This will be the first in a series of hearings, and future hearings will delve deeper into discrete policy areas.
“I would note that today we are exploring mobile payments, not mobile banking.  Although both require a cell phone or a smartphone, mobile banking is simply a service that allows consumers to access their bank account over the internet, on a mobile device, so they can perform account transactions. 
“Mobile payments are much more.  They allow consumers to pay for a purchase or transfer money using a mobile device.  The device takes the place of cash, check or card.  The payment is made through a web page, a downloadable app, an email or a text message, using a bank, a money service business or a mobile network provider.  By simply waving or tapping the device at a terminal or texting a few letters, a payment is made.  At a future hearing, we plan to invite industry witnesses to describe how this works in more detail. 

“Today’s witnesses are at the forefront of mobile payments and have spent much time studying this topic.  They will describe our country’s current mobile payment system, and how it is different from similar systems in other parts of the world. 

“They will also discuss trends in mobile payment use – such as who is making mobile payments, and how much money is moving through our payment system.  It is not surprising to learn that people between the ages of 18 and 29 are the most active mobile payment users.  What may be surprising is that the underbanked make significant use of mobile payments.  This can be explained by the high rate of mobile and smartphone ownership across socio-economic lines.
“This morning we will also explore barriers to the use and development of mobile payments in the United States, opportunities for growth in this market place and regulatory gaps in the various mobile payment models. 
“The current framework of laws that govern mobile payments depends on how the payment is modeled.  If the payment is made through a bank, then the existing set of banking and consumer protection laws apply.  If the payment is made through a money service business, then at a minimum, federal consumer financial, anti-money laundering and state laws apply. 

“However, payments made through a text message via a mobile network provider don’t fall under the banking framework.  This Committee began laying the foundation for rules to oversee these new types of payments in the Wall Street Reform Act.  The Consumer Financial Protection Bureau was given the authority to apply federal consumer financial laws to these transactions.
“The bottom line is that as the mobile payment system evolves, it is important for this Committee to provide proper oversight so that these payments can be secure and convenient. 
“I look forward to today’s testimony, and I now turn to Ranking Member Shelby for his opening statement.”