Up to a billion people a year are expected to use mobile phones, tablet computers and other hand-held devices for banking and payments by 2017. But the UK Financial Conduct Authority (FCA) warns in a recent report that mobile banking can give rise to technology- and data-related risks that affect both consumers and firms.
Firms providing mobile banking services need to “test the robustness of their IT systems, including transactional security, thoroughly stress test their products, and store sensitive data securely,” the FCA says.
The FCA has identified six risks:
- Fraud: The FCA is particularly interested in the risk of fraud against
consumers and what firms are considering doing to mitigate that
- Security issues: Malware and viruses are important risks faced by consumers that firms need to consider.
- Use of third parties: Because many firms are likely to use or partner with technology providers and consultants, “there may be a chain of companies involved in a customer’s transaction, resulting in a greater likelihood of a problem occurring,” the FCA says. “We want to understand the measures firms are taking to mitigate the risks around
- Consumer awareness: Smaller screens and keyboards increase the risk that consumers will make mistakes when making payments, so the FCA wants to know how firms are mitigating these risks and how they are preparing to resolve mistakes.
- Technology risk: Commercial pressures to develop and launch products quickly may mean there is a risk that services could be launched without sufficient testing and protection.
- Anti-money-laundering: The FCA wants to ensure that firms have “proportionate and risk-sensitive systems and controls in place” to deal with their anti-money laundering obligations. The regulator
is currently considering the extent to which firms may need to make
additional checks on the identity of the payee. Mobile banking may also make it “challenging” for firms to identify and report suspicious transactions.
The FCA’s interim report is available here: Mobile banking and payments: Supporting an innovative and secure market