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THE DISRUPTER SERIES: MOBILE PAYMENTS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON COMMERCE, MANUFACTURING, 

AND TRADE 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

DECEMBER 1, 2015 

Serial No. 114–105 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 

COMMITTEE ON ENERGY AND COMMERCE 

FRED UPTON, Michigan 

Chairman 

JOE BARTON, Texas 

Chairman Emeritus 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

GREG WALDEN, Oregon 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

Vice Chairman 

STEVE SCALISE, Louisiana 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

BILL JOHNSON, Ohio 

BILLY LONG, Missouri 

RENEE L. ELLMERS, North Carolina 

LARRY BUCSHON, Indiana 

BILL FLORES, Texas 

SUSAN W. BROOKS, Indiana 

MARKWAYNE MULLIN, Oklahoma 

RICHARD HUDSON, North Carolina 

CHRIS COLLINS, New York 

KEVIN CRAMER, North Dakota 

FRANK PALLONE, JR., New Jersey 

Ranking Member 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JANICE D. SCHAKOWSKY, Illinois 

G.K. BUTTERFIELD, North Carolina 

DORIS O. MATSUI, California 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

JERRY MCNERNEY, California 

PETER WELCH, Vermont 

BEN RAY LUJA ́ N, New Mexico 

PAUL TONKO, New York 

JOHN A. YARMUTH, Kentucky 

YVETTE D. CLARKE, New York 

DAVID LOEBSACK, Iowa 

KURT SCHRADER, Oregon 

JOSEPH P. KENNEDY, III, Massachusetts 

TONY CA ́ RDENAS, California 

SUBCOMMITTEE ON COMMERCE, MANUFACTURING, AND TRADE

MICHAEL C. BURGESS, Texas 

Chairman 

LEONARD LANCE, New Jersey 

Vice Chairman 

MARSHA BLACKBURN, Tennessee 

GREGG HARPER, Mississippi 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

GUS M. BILIRAKIS, Florida 

SUSAN W. BROOKS, Indiana 

MARKWAYNE MULLIN, Oklahoma 

FRED UPTON, Michigan (ex officio) 

JANICE D. SCHAKOWSKY, Illinois 

Ranking Member 

YVETTE D. CLARKE, New York 

JOSEPH P. KENNEDY, III, Massachusetts 

TONY CA ́ RDENAS, California 

BOBBY L. RUSH, Illinois 

G.K. BUTTERFIELD, North Carolina 

PETER WELCH, Vermont 

FRANK PALLONE, JR., New Jersey (ex 

officio) 

(II) 

(III) 

C O N T E N T S 

Page 

Hon. Michael C. Burgess, a Representative in Congress from the State of 

Texas, opening statement .................................................................................... 1 

Prepared statement .......................................................................................... 3 

Hon. Janice D. Schakowsky, a Representative in Congress from the State 

of Illinois, opening statement .............................................................................. 4 

Prepared statement .......................................................................................... 5 

Hon. Fred Upton, a Representative in Congress from the State of Michigan, 

opening statement ................................................................................................ 5 

Prepared statement .......................................................................................... 6 

Hon. Frank Pallone, Jr., a Representative in Congress from the State of 

New Jersey, opening statement .......................................................................... 7 

Prepared statement .......................................................................................... 8 

WITNESSES

John Muller, Vice President, Global Payments Policy, PayPal ........................... 9 

Prepared statement .......................................................................................... 12 

Answers to submitted questions ...................................................................... 96 

Jessica E. Deckinger, Chief Marketing Officer, Merchant Customer Exchange 20 

Prepared statement .......................................................................................... 24 

Answers to submitted questions ...................................................................... 99 

Sarah Jane Hughes, University Scholar and Fellow in Commercial Law, 

Maurer School of Law, Indiana University ........................................................ 33 

Prepared statement .......................................................................................... 35 

Answers to submitted questions ...................................................................... 101 

Sang W. Ahn, Chief Commercial Officer, U.S. Samsung Pay, Samsung Electronics America .................................................................................................... 48 

Prepared statement .......................................................................................... 50 

Answers to submitted questions ...................................................................... 105 

SUBMITTED MATERIAL

Statement of the Electronic Transactions Association, December 1, 2015, submitted by Mr. Lance ............................................................................................ 80 

Statement of the National Association of Convenience Stores and the Society 

of Independent Gasoline Marketers of America, December 1, 2015, submitted by Mr. Lance ............................................................................................ 85 

Statement of the National Retail Federation, December 1, 2015, submitted 

by Mr. Lance ......................................................................................................... 91 

(1) 

THE DISRUPTER SERIES: MOBILE PAYMENTS 

TUESDAY, DECEMBER 1, 2015 

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON COMMERCE, MANUFACTURING, AND

TRADE, COMMITTEE ON ENERGY AND COMMERCE, 

Washington, DC. 

The subcommittee met, pursuant to call, at 10:21 a.m., in room 

2322, Rayburn House Office Building, Hon. Michael C. Burgess 

(chairman of the subcommittee) presiding. 

Members present: Representatives Burgess, Lance, Blackburn, 

Harper, Guthrie, Olson, Pompeo, Kinzinger, Bilirakis, Brooks, 

Mullin, Upton (ex officio), Schakowsky, Clarke, Ca ́ rdenas, Welch, 

and Pallone (ex officio). 

Staff present: Gary Andres, Staff Director; Rebecca Card, Assistant Press Secretary; James Decker, Policy Coordinator, Commerce, 

Manufacturing, and Trade; Andy Duberstein, Deputy Press Secretary; Graham Dufault, Counsel, Commerce, Manufacturing, and 

Trade; Melissa Froelich, Counsel, Commerce, Manufacturing, and 

Trade; Paul Nagle, Chief Counsel, Commerce, Manufacturing, and 

Trade; Tim Pataki, Professional Staff Member; Olivia Trusty, Professional Staff, Commerce, Manufacturing, and Trade; Dylan 

Vorbach, Legislative Clerk; Michelle Ash, Democratic Chief Counsel, Commerce, Manufacturing, and Trade; Christine Brennan, 

Democratic Press Secretary; Jeff Carroll, Democratic Staff Director; 

Ashley Jones, Democratic Director, Outreach and Member Services; 

Caroline Paris-Behr, Democratic Policy Analyst; Tim Robinson, 

Democratic Chief Counsel; Diana Rudd, Democratic Legal Fellow; 

and Ryan Skukowski, Democratic Policy Analyst. 

OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS 

Mr. BURGESS. The Subcommittee on Commerce, Manufacturing, 

and Trade will now come to order. The Chair will recognize himself 

for 5 minutes for an opening statement, and I do want to welcome 

everyone to our hearing this morning examining mobile payments, 

which are poised to upend how consumers pay for goods and services in stores, online, in apps, and at the parking meter. This hearing is the latest in our disrupter series, covering a variety of technologies that are redefining our lives and improving our or economic condition. 

This past week, Black Friday, Small Business Saturday, Cyber 

Monday flooded all of our inboxes and took over the commercial 

breaks on television. As the holiday shopping season is in full 

2 

swing, this is a good time to take a look at the consumer experience with mobile payments. This morning, we will hear from our 

witnesses representing a variety of innovative products and services in the mobile payments arena. This hearing is an opportunity 

to learn about the innovations that are available to consumers 

today and those that will be available in the near future, but we 

recognize that there are exciting innovations on the horizon for 

payments, including mobile currencies, which will be a topic for another day. 

Smartphones are increasingly an ever-present part of our lives. 

It is no surprise that they are also changing the way that we shop 

for goods and services. You can shop on your tablet in front of the 

television, compare prices on your phone as you browse in a store, 

and pay without ever pulling out your wallet. Consumers have access to more information, and more competitive options are at the 

tip of their fingers during the busiest shopping season of the year. 

There has not been this big an upheaval in how consumers pay for 

goods and services, from groceries to haircuts, since computers replaced the old knuckle-buster manual imprinters in the 1980s. 

In 2014, 22 percent of mobile phone owners reported making a 

purchase with their phone; 39 percent used their phones to make 

a purchase in the store. When you find that perfect Christmas gift, 

you may be able to pay by tapping your phone at checkout or 

clicking the PayPal checkout button on a mobile Web site. When 

you want to send your friend money for the concert ticket they 

bought for you, all you need is their email address or their mobile 

phone number. These mobile payment options include protections 

not available with cash and are easy to use for consumers who may 

be more likely to have their phone in their pocket than carry the 

exact change with them. 

Some basic questions remain top of mind for consumers when 

they think about mobile payments: Are they safe? Can I use my 

phone? This hearing is an opportunity to hear from companies implementing the cutting-edge technologies in mobile payments and 

how they are addressing these and other concerns raised by consumers. 

Two of the top security topics that are raised by mobile payments 

are authentication, how the device knows you have permission to 

make the payment with the device, and tokenization, protecting 

your payment data through the payment process. We all know 

passwords are difficult. They are difficult to remember. They are 

difficult to keep straight, which is why many people—myself not included, but many people—simply use their name for their user 

name and 1234 as their password. Mobile devices offer some alternatives to the traditional password that add an additional layer of 

protection for consumers. 

Authentication is the process that a system uses to verify the 

identity of a person that wants access to the system. The user 

name and password is the most typical authentication process used 

to log into a variety of Web sites. Mobile devices have changed. 

They have changed how people think about authentication. Fingerprint sensors, cameras are found in an increasing number of mobile 

devices; and instead of having to remember a separate password to 

unlock your phone or tablet, you may be able to use the fingerprint 

3 

scanner to unlock the device with just a touch. This protects the 

information on the phone, including access to payment options. 

Another security feature that is regularly brought up in discussions about mobile payments is tokenization. We are all familiar 

with the tokens you get at the fair or the arcade. Tokens in a mobile payment system are similar in concept, replacing the valuable 

currency or payment information with a code that then becomes 

useless for another transaction if someone were to steal it. 

As has been the case throughout history, technology has the potential to solve problems and improve our lives. Mobile payments 

are no exception to that trend. So I look forward this morning to 

hearing from our witnesses and how they are leveraging the mix 

of technologies to provide an easy and secure experience for United 

States consumers as we make our way through this shopping season. 

[The prepared statement of Mr. Burgess follows:] 

PREPARED STATEMENT OF HON. MICHAEL C. BURGESS

This hearing is the latest in our Disrupter Series covering a variety of technologies that are redefining our lives and improving our economic condition. 

Over the last week, Black Friday, Small Business Saturday, and Cyber Monday 

flooded our inboxes and took over commercial breaks. As the holiday shopping season is in full swing, this is a good time to take a look at consumers’ experience with 

mobile payments. 

This morning, we will hear from witnesses representing a variety of innovative 

products and services in the mobile payments arena. This hearing is an opportunity 

to learn about the innovations that are available to consumers today and in the near 

future, but we recognize there are more exciting innovations on the horizon for payments, including mobile currencies, which may be a topic for another day. 

Smartphones are increasingly an ever-present part of our lives and it’s no surprise 

that they are also changing the way we shop for goods and services. You can shop 

on your tablet in front of the TV, compare prices on your phone as you browse in 

a store, and pay without ever pulling out your wallet. Consumers have access to 

more information and competitive options at the tip of their fingers during the busiest shopping season of the year. 

There has not been this big of an upheaval in how consumers pay for goods and 

services—their groceries or a haircut—since computers replaced the old knucklebusting manual imprinters in the 1980s. 

In 2014, 22 percent of mobile phone owners reported making a purchase on their 

phone. Thirty-nine percent used their phones to make a purchase in a store. 

When you find the perfect Christmas present, you may be able to pay by tapping 

your phone at checkout or clicking the PayPal Check Out button on a mobile Web 

site. 

When you want to send your friend money for the concert ticket they bought for 

you, all you need is their email address or mobile phone number. These mobile payments options include protections not available with cash, and are easy to use for 

consumers who may be more likely to have their phone in their pocket than exact 

change. 

Some basic questions remain top of mind for consumers when they think about 

mobile payments: ‘‘Are they safe?’’ ‘‘Can I use my phone?’’ 

This hearing is an opportunity to hear from companies implementing the cutting 

edge technologies in mobile payments and how they are addressing these and other 

concerns raised by consumers. 

Two of the security topics that are raised by mobile payments are authentication, 

how the device knows you have permission to make the payment with the device; 

and tokenization, protecting your payment data through the payment process. 

As we all know, passwords are difficult. They are difficult to remember and difficult to keep straight which is why many people have the same password for multiple accounts. Mobile devices offer some alternatives to the traditional password 

that add an additional layer of protection for consumers. 

Authentication is the process that a system uses to verify the identity of a person 

that wants to access that system. Your user name and password or passcode is the 

most typical authentication process used to log into a wide variety of Web sites. 

4 

Mobile devices have changed how people think about authentication. Fingerprints 

sensors and cameras are found on an increasing number of mobile devices. Now, instead of having to remember a separate password to unlock your phone or tablet, 

you may be able to use the fingerprint scanner and unlock the device with just a 

touch. This protects the information on your phone, including access to payment options. 

Another security feature that is regularly brought up in discussions about mobile 

payments is tokenization. We’re all familiar with the tokens you get at a fair or an 

arcade. Tokens in mobile payments are similar in concept—replacing the valuable 

currency or payment information with a code that is useless in another transactions 

if a hacker were to steal it. 

As has been the case throughout history, technology has the potential to solve 

problems and improve our lives. Mobile payments are no exception to this trend. 

I look forward to hearing from our witnesses about how they are leveraging a mix 

of technologies to provide an easy and secure experience for U.S. consumers as we 

make our way through the holiday shopping season. 

Mr. BURGESS. And I will yield back the balance of my time and 

recognize the subcommittee ranking member, Ms. Schakowsky, 5 

minutes for an opening statement, please. 

OPENING STATEMENT OF HON. JANICE D. SCHAKOWSKY, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS 

Ms. SCHAKOWSKY. Thank you, Mr. Chairman, for holding this 

hearing and the series of hearings on disrupters. I just learned that 

at my bank, I can now make a deposit by taking a picture of the 

front and back of my check, and my bank will take it, although it 

doesn’t account for my husband’s really bad handwriting and says 

that it can’t verify that the number I put in is the number he wrote 

on the check. That is a problem. 

But I think this holiday shopping season, it is very important to 

hear from our witnesses about this important new technology. We 

do expect mobile payments to double from today to 2020. One of 

the fastest growing sectors of the U.S. economy, mobile payments 

do facilitate transactions with anyone from a food truck or farmers 

market seller or taxi driver, parking meter, and they have made 

buying and selling goods and services easier in many ways. But as 

this technology continues to expand, we definitely need to understand how the payment structure works, security, consumer protection vulnerabilities. How to address those issues is a responsibility 

of our subcommittee. We want to maximize benefits and minimize 

risks, obviously. 

Mobile payment technologies rely on a number of nontraditional 

identifiers such as geolocation, purchase preference, phone numbers, email addresses. Those features can enhance protections 

against payment fraud. However, they can also put consumers at 

greater risk if they are unprotected or if their use extends beyond 

managing payments. With regard to electronic communications 

generally, we need to ensure that all of the players engaged in mobile payments, hardware and software developers, businesses, 

banks, credit unions, and credit card companies, are taking reasonable security measures to protect the information that they are 

handling. We also need to make sure that consumers know how 

these payment structures differ from more traditional transactions. 

Consumers need to know how consumer financial liability for these 

types of payments differs from those made using credit or debit 

5 

cards. They should also know how mobile payments can be used to 

cram consumers, running up bills that they never explicitly approved. And as the subcommittee responsible for consumer protection, we have an obligation to close those and other existing loopholes that leave consumers more vulnerable. 

So I look forward to hearing from our witnesses, getting their 

perspectives on opportunities, challenges, and the way forward 

with regard to mobile payments. 

And I yield back my time. 

[The prepared statement of Ms. Schakowsky follows:] 

PREPARED STATEMENT OF HON. JANICE D. SCHAKOWSKY

Thank you, Mr. Chairman, for holding today’s hearing on mobile payments. I look 

forward to hearing from our witnesses on this important subject, which is all the 

more relevant during the holiday shopping season. 

With mobile payments expected to double from today to 2020, this is one of the 

fastest-growing sectors of the U.S. economy. Mobile payments facilitate transactions 

with anyone from a food truck or farmers market seller to a taxi driver, and they 

have made buying and selling goods and services easier in many ways. 

However, as this technology continues to expand, we need to understand how 

these payment structures work, what security and consumer protection 

vulnerabilities exist, and how to address those issues to maximize benefits while 

minimizing risks. 

Mobile payment technologies rely on a number of non-traditional identifiers such 

as geolocation, purchase preferences, phone numbers and email addresses. Those 

features can enhance protections against payment fraud. However, they can also put 

consumers at greater risk if they are unprotected or if their use extends beyond 

managing payments. 

As I have previously mentioned with regard to electronic communication generally, we need to ensure that all of the players engaged in mobile payments—hardware and software developers, businesses, banks, credit unions, and credit card companies—are taking reasonable security measures to protect the information they are 

handling. 

We also need to make sure that consumers know how these payment structures 

differ from more traditional transactions. Consumers need to know how consumer 

financial liability for these types of payments differs from those made using credit 

or debit cards. They should also know how mobile payments can be used to ‘‘cram’’ 

consumers—running up bills that they never explicitly approve. And, as the subcommittee responsible for consumer protection, we have an obligation to close those 

and other existing loopholes that leave consumers more vulnerable. 

I look forward to hearing our witnesses’ perspectives on the opportunities, challenges, and the way forward with regard to mobile payments. 

Mr. BURGESS. The Chair thanks the gentlelady. The gentlelady 

yields back. 

The Chair recognizes the chairman of the full committee, Mr. 

Upton, 5 minutes for an opening statement, please. 

OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN 

Mr. UPTON. Good morning. And today we continue our Disrupter 

Series. We have previously examined the Internet of things, the 

sharing economy, and, most recently, drones. 

Today we discuss the growing trend of mobile payments. No matter where folks choose to travel or shop, whether it be in Michigan, 

the Nation, or even across the globe, their smartphones are everpresent, always at the ready to provide direction, daily news and 

scores, and even make payments. Early estimates show that, for 

the first time ever, more people shopped online than in stores over 

the Thanksgiving holiday. Cyber Monday estimates are still being 

6 

tallied, but we are no doubt seeing a fundamental shift in how people are buying the goods and services available to them throughout 

our economy. Consumers have more choices than ever before about 

when and where to shop. These choices open up opportunities for 

innovations to take root and spread throughout the economy. 

We have seen this sort of disruption throughout this series of 

hearings, and mobile payments are certainly no different. They are 

impacting how the Internet of things and the sharing economy develops. The Disrupter Series remains important as we work to better understand how innovations impact consumers, job creation, 

and our economy as a whole. 

Mobile payment technologies have opened up opportunities for 

individuals and businesses alike, so businesses small and large can 

benefit from these disruptions as we have seen with a hardware 

like Square and software like Venmo, which make payments easier 

for small businesses and between respectively. These are just two 

examples in an ecosystem that is bursting with growth as more 

and more Americans get smartphones, tablets, and other mobile devices. New technologies and competition are responding to consumer needs. 

Mobile payment innovation is happening all over the country. 

However, adoption across the ecosystem continues to be a challenge 

that all businesses in this space are working to address. There are 

a lot of facets to the mobile payment space, and I am pleased that 

today we are going to learn more about the options that consumers 

have, particularly how these options can and will continue to improve security for consumers and job creators. 

[The prepared statement of Mr. Upton follows:] 

PREPARED STATEMENT OF HON. FRED UPTON

Today we continue our Disrupter Series. We have previously examined the Internet of Things, the Sharing Economy, and most recently drones—and today we discuss the growing trend of mobile payments. No matter where folks choose to travel 

or shop, in Michigan, the Nation, and even abroad, their smartphones are ever 

present, always at the ready to provide directions, daily news and scores, and even 

make payments. 

Early estimates indicate that for the first time ever, more people shopped online 

than in stores over the Thanksgiving holiday weekend. The Cyber Monday estimates are still being tallied, and we are no doubt seeing a fundamental shift in how 

people are buying the goods and services available to them throughout our economy. 

Consumers have more choices than ever about when and where to shop. These 

choices open up opportunities for innovation to take root and spread throughout the 

economy. 

We have seen this sort of disruption throughout this series of hearings and mobile 

payments are no different. They are impacting how the Internet of Things and the 

sharing economy develop. The Disrupter Series remains important as we work to 

better understand how innovations impact consumers, job creation, and our economy 

as a whole. 

Mobile payment technologies have opened up opportunities for individuals and 

businesses alike. Businesses small and large can benefit from these disruptions as 

we have seen with hardware like Square and software like Venmo, which make payments easier for small businesses and between friends, respectively. These are just 

two examples in an ecosystem that is bursting with growth as more and more Americans get smartphone, tablets, and other mobile devices. 

New technologies and competition are responding to consumer needs. Mobile payment innovation is happening all over the country. However, adoption across the 

ecosystem continues to be a challenge that all businesses in this space are working 

to address. 

7 

There are a lot of facets to the mobile payments space and I am pleased that 

today we will learn more about what options consumers have and particularly how 

those options can and will continue to improve security for consumers and job creators. 

Mr. UPTON. And I yield the balance of my time to Marsha 

Blackburn. 

Mrs. BLACKBURN. Thank you, Mr. Chairman. 

And I am so appreciative that we are doing this hearing today, 

and I thank our witnesses. You all are the experts, and we have 

plenty of questions that we are going to have for you. Wireless and 

mobile devices and quick purchases are changing things. And this 

past weekend, my 6-year-old grandson got into the app store on my 

iPhone, found something that he wanted to buy, handed me the 

phone and said, ‘‘Marcia, you need to pay for this,’’ and, of course, 

I did not. But I use this illustration to make a point of the simplicity and also the assumption of our kids and grandkids that it 

is going to be at the scan of a screen or a touch of a button or with 

great ease that you are going to be able to make these purchases 

on the go, in realtime, paid in realtime, and with great convenience 

and security. 

And that is where much of our focus is going to be, whether it 

is the multifactor identification or tokenization or what I want to 

hear from you, the ‘‘what is next?’’ Where do you think we are 

going with this? Because convenience, yes, people want it. Security, 

they are going to demand it because they want to be able to protect 

their virtual presence online just as they are able to protect their 

presence in the brick-and-mortar relationship with those that they 

are choosing to do business with. So I thank you for the time that 

you are going to spend with us today, your preparation in coming 

to the committee, and I look forward to your thoughts on what is 

next. 

I yield back. 

Mr. BURGESS. The gentlelady yields back. The Chair thanks the 

gentlelady. 

The Chair recognizes the gentleman from New Jersey, the ranking member of the full committee, 5 minutes for an opening statement, please. 

OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW JERSEY 

Mr. PALLONE. Thank you, Chairman Burgess. 

During today’s hearing, we will discuss the new ways consumers 

are paying for goods and services through their mobile devices. At 

a time when it seems like virtually everything is tied to our 

smartphones, it should come as no surprise that we are now able 

to store credit cards electronically, transfer funds directly to our 

peers, and make purchases by simply tapping our phones to a terminal at the point of sale. 

These exciting innovations hold promise for consumers. Imagine 

the convenience of being able to send money instantly to a friend 

or family member regardless of location or proximity to an ATM. 

For consumers who forget their credit cards at an outing, a mobile 

peer-to-peer payment could be the difference between being 

8 

squared away and an IOU. The ability to store credit cards in your 

phone may also offer consumers some peace of mind that in the 

event of a lost or stolen phone, their information is safe behind a 

pass code, and a physical card is not compromised. 

Perhaps most encouraging for consumers with limited or no access to a bank, mobile payments can be a welcome alternative for 

purchasing the goods and services they need. For example, the use 

of mobile payments has skyrocketed in Kenya, where access to 

banking is quite limited. 

With all these new products that involve consumers’ personal information, however, privacy concerns must be raised. In general, 

mobile payment apps can access a wealth of personal data through 

a user’s smartphone, such as phone numbers, geolocation, email addresses, and detailed purchase histories. Consumers do not know 

who has access to their information or with whom it is shared. This 

data may be used in ways the consumer never intended, including 

by merchants sending unwanted advertising tailored to consumers 

through their mobile devices. And that personal information could 

also be sold, so consumers’ location and other private matters are 

shared with the highest bidder. That is why privacy protection 

should be baked into these new mobile pay applications. 

It is also important that consumers are ensured a secure transaction through a mobile payment system. As with any mobile device or application, digitally stored or transmitted information is 

hackable. With the major data breaches of the past few years still 

fresh in consumers’ minds, mobile payment users will understandably be hesitant about using an app if there is no protection from 

hackers who may try to intercept their personal information. It has 

been made clear through this series of hearings on disrupters, innovation, and consumer protection must go hand-in-hand for these 

new technologies to flourish. Mobile payments present an exciting 

opportunity to make e-commerce a more seamless experience for 

consumers, and I look forward to hearing from today’s witnesses on 

this topic. 

Thank you, Mr. Chairman, and I yield back. 

[The prepared statement of Mr. Pallone follows:] 

PREPARED STATEMENT OF HON. FRANK PALLONE, JR. 

Thank you Chairman Burgess. During today’s hearing, we will discuss the new 

ways consumers are paying for goods and services through their mobile devices. 

At a time when it seems like virtually everything is tied to our smartphones, it 

should come as no surprise that we are now able to store credit cards electronically, 

transfer funds directly to our peers, and make purchases by simply tapping our 

phones to a terminal at the point of sale. 

These exciting innovations hold promise for consumers. Imagine the convenience 

of being able to send money instantly to a friend or family member regardless of 

location or proximity to an ATM. For consumers who forget their credit card on an 

outing, a mobile peer-to-peer payment could be the difference between being squared 

away and an I.O.U. 

The ability to store credit cards in your phone may also offer consumers some 

piece of mind that, in the event of a lost or stolen phone, their information is safe 

behind a passcode and a physical card is not compromised. 

Perhaps most encouraging, for consumers with limited or no access to a bank, mobile payments can be a welcome alternative for purchasing the goods and services 

they need. For example, the use of mobile payments has skyrocketed in Kenya, 

where access to banking is quite limited. 

9 

As with all new products that involve consumers’ personal information, however, 

privacy concerns must be raised. 

In general, mobile payment apps can access a wealth of personal data through a 

user’s smartphone, such as phone numbers, geolocation, email addresses, and detailed purchase histories. Consumers do not know who has access to their information or with whom it is shared. This data may be used in ways the consumer never 

intended, including by merchants sending unwanted advertising tailored to consumers through their mobile devices. That personal information also could be sold, 

so consumers’ location and other private matters are shared with the highest bidder. 

That is why privacy protections should be baked into these new mobile pay applications. 

It is also important that consumers are ensured secure transactions through a 

mobile payment system. As with any mobile device or application, digitally stored 

or transmitted information is hackable. With the major data breaches of the past 

few years still fresh in consumers’ minds, mobile payment users will understandably 

be hesitant about using an app if there is no protection from hackers who may try 

to intercept their personal information. 

It has been made clear through this series of hearings on disrupters, innovation 

and consumer protection must go hand in hand for these new technologies to flourish. 

Mobile payments present an exciting opportunity to make e-commerce a more 

seamless experience for consumers, and I look forward to hearing from today’s witnesses on this topic. Thank you and I yield back. 

Mr. BURGESS. The gentleman yields back. The Chair thanks the 

gentleman. 

And this concludes Member opening statements. The Chair 

would remind Members that, pursuant to committee rules, all 

Members’ opening statements will be made part of the record. 

And we do want to thank our witnesses for being here this morning and taking time to testify before the subcommittee. Our witness panel today—and we do have a good and great group—our 

witness panel for today includes Mr. John Muller, the senior vice 

president for global payments policy at PayPal; Ms. Jessica 

Deckinger, chief marketing officer at the Merchant Consumer Exchange; Ms. Sarah Jane Hughes, university scholar and fellow in 

commercial law at the Indiana University School of Law; and Mr. 

Sang Ahn, chief commercial officer at U.S. Samsung Pay. 

We appreciate all of you being with us this morning. We will 

begin the panel with you, Mr. Muller. 

And each you of will be recognized for 5 minutes for a summary 

of your opening statement. 

Mr. Muller, you are recognized. 

STATEMENTS OF JOHN MULLER, VICE PRESIDENT, GLOBAL 

PAYMENTS POLICY, PAYPAL; JESSICA E. DECKINGER, CHIEF 

MARKETING OFFICER, MERCHANT CUSTOMER EXCHANGE; 

SARAH JANE HUGHES, UNIVERSITY SCHOLAR AND FELLOW 

IN COMMERCIAL LAW, MAURER SCHOOL OF LAW, INDIANA 

UNIVERSITY; AND SANG W. AHN, CHIEF COMMERCIAL OFFICER, U.S. SAMSUNG PAY, SAMSUNG ELECTRONICS AMERICA 

STATEMENT OF JOHN MULLER 

Mr. MULLER. Thank you, Mr. Chairman and Ranking Member 

Schakowsky, and the other members of the committee. Thank you 

for the opportunity to testify on behalf of PayPal. My name is John 

Muller, and I am vice president of payments policy for PayPal. And 

PayPal has been involved in mobile payments now for 16 years and 

started with the cutting-edge payments mobile device of its time, 

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which was the PalmPilot, you may remember, the personal digital 

assistant without phone capability, but a very portable device. And 

PayPal was actually built to beam payments from one PalmPilot to 

another. At that point, we quickly realized that more people had 

email and Internet access than owned a palm pilot palm pilot, but 

we have now come back full circle to a focus on mobile payments 

to the point that last year we processed 1 billion payments from 

mobile devices all around the world, and just in the last quarter 

of this year, the growth rate continues, and we processed 345 million mobile payments. I have some more information on PayPal in 

the prepared statement, so I wanted to shift a little bit and just 

make a few high-level points about mobile payments and where we 

stand today. 

One point is payments follows commerce, and it follows where 

people spend their time. Very few people, maybe the people on this 

panel excepted, make a payment just for fun or just to try it out. 

There is always a purpose behind it, and for most of us, the purpose is commerce, or the purpose might be to pay back a friend. 

And increasingly, we are doing our shopping on mobile devices, and 

we have our mobile devices with us when we are out with a friend 

or contacting a friend, so it is only natural for payments to be part 

of that broader mobile experience. 

Another point is that payment has been mobile for quite some 

time. There are few things more portable than paper currency and 

coins or a plastic card. What is really new about the new generation of mobile payments is the opportunity for all of us in the payments industry to take advantage of what the technology makes 

available, namely increased security through things like the device 

identifier or geolocation on the device or biometrics on the device— 

the thumbprint being the first live version of that, but certainly 

more to come in that arena. And then, to that security, add a better 

user experience compared to just paying with cash or a card: things 

like automatically recognizing my loyalty program, giving me 

points, giving me choice of funding methods. So if I have a card, 

a plastic card, then I have to use that card. If I have a digital wallet like PayPal or the other wallets, I can use my mobile device in 

realtime to switch among all the different payment methods that 

I have available. So those are some of the reasons why we see the 

growing popularity of mobile payments. 

Another point I wanted to make is we often use the term broadly 

mobile payments, and it really covers to a large degree three different fields. One—and certainly the one that predominates for 

PayPal and many other payment companies—is using the mobile 

device as a substitute for what a few years ago would be a transaction on the laptop or desktop computer, so just communicating 

with a new kind of device but really very similar to the kind of ecommerce transactions we were doing in the early 2000s. 

The second type—and certainly the one that gets a great deal of 

attention for good reason now because the opportunity to touch not 

just e-commerce but physical commerce—is using the phone as a 

substitute for the plastic card and paying at a physical point of 

sale. 

And then the third type, certainly not to diminish it in any way, 

equally important, is using the mobile device as a way of enabling 

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businesses, mostly small businesses, to accept cards and other payment methods electronically in a mobile business environment, 

whether it is a food truck or a farmers market or any of the other 

many opportunities that small businesses use for devices, attaching 

a small reader to their device and using it usually to swipe a card 

or enter another payment method. Companies like Square and 

PayPal have made that available to small businesses all over the 

country. And all of those are different types of mobile payments, 

but it is important to recognize that there are distinctions among 

the three. 

And then, finally, also important to recognize that the field is already regulated. We have to give credit to the drafters in particular 

of the Electronic Fund Transfer Act. When they created consumer 

protections for what at the time was primarily the ATM card quite 

a few years ago, they drafted the statute in terms of access devices 

and financial accounts, not limited to plastic cards or any other 

kind of specific technology. So an access device can be a password 

or a phone or any other device, and the consumer protections remain in place supplemented by the zero liability programs that 

Visa and MasterCard and PayPal all offer to buyers. So I just 

wanted to make those broader points. 

And, with that, I will conclude my remarks. Thank you, and I 

look forward to the questions. 

[The prepared statement of Mr. Muller follows:] 

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Mr. BURGESS. The Chair thanks the gentleman. 

And, Ms. Deckinger, you are recognized for 5 minutes. 

STATEMENT OF JESSICA E. DECKINGER 

Ms. DECKINGER. Thank you, Mr. Chairman, Ranking Member 

Schakowsky, and distinguished members of the subcommittee. 

Thank you for the opportunity to testify on behalf of Merchant Customer Exchange for MCX. We appreciate the invitation to appear 

before the subcommittee to discuss the rapidly developing and 

evolving mobile payment space. The subcommittee’s interest in the 

topic is welcome as mobile payment solutions are rapidly moving 

to the forefront of consumer technology innovations, both in the 

United States and globally. 

Who is MCX? So the Merchant Customer Exchange was founded 

by a leading group of U.S. merchants in 2012 to create a broadly 

accepted mobile commerce platform. MCX’s members include retail 

leaders in the big box, convenience, fuel, grocery, quick service, full 

dining, and specialty retail travel categories. MCX is focused on 

creating convenience for consumers by allowing them to securely 

pay for goods and services from their handheld mobile device while 

also providing opportunities for merchants to directly connect with 

consumers to provide offers, loyalty programs, and more direct 

interaction with the merchants they shop with. I prepared a short 

video for you to get a sense of what CurrentC, our app, is all about. 

[video shown.] 

Ms. DECKINGER. This new network will benefit a wide range of 

consumers in three ways: One, delivering a better shopping and 

payment experience by enabling customers to interact directly with 

merchants through virtually any smartphone; two, safeguarding 

consumers and merchants by maintaining the direct relationship 

that merchants have with customers and protecting customer data; 

three, bringing balance to the payments ecosystem. Together MCX’s member companies process in excess of $1.2 trillion in payments annually, giving MCX scale and ubiquity that will 

allow consumers to use their smartphones wherever they may 

shop. MCX brings together the best-in-class technology and mobile 

payments partners to create an unparalleled network in the mobile 

space. To achieve this goal, MCX has launched its own proprietary 

application called CurrentC that can be downloaded to any 

smartphone a customer may choose. 

We have conducted private rollouts with leading retailers and 

their employees, and as of September 15, 2015, this year, we are 

currently in a public beta operating in Columbus, Ohio. The purpose of our beta in Columbus is to gather additional learnings from 

consumers and merchants to continue to refine and improve the 

product to meet the needs of both consumers and the merchants. 

Expansion of the rollout will continue as additional merchants and 

partners go live in Columbus through the balance of 2015 with national public availability currently anticipated in 2016. 

Today consumers’ experiences with payments can differ fairly 

drastically depending on where they are shopping. At a fuel station, they may be asked to dip their card or type their ZIP Code 

in to begin fueling. At a sit-down dining establishment, consumers 

wait for the server before physically relinquishing their card to the 

21 

establishment. Other merchants have more self-service experience, 

where consumers swipe their own cards at checkout. And we have 

specifically designed our technology platform to support the best, 

most progressive technologies to deliver an optimal payments experience at any merchant to serve their customers in the best way 

possible. 

To deliver that best consumer experience at merchants, we are 

leveraging several types of technology solutions. We remain open to 

new technologies and are always looking to source the very best options for consumers and our merchants. At present, we are working 

with several different innovative technologies, including QR codes, 

Bluetooth low-energy beacons, and geolocation, providing the best 

user experience regardless of location. 

Fundamentally the current payment system works well from a 

consumer’s perspective. Swiping a credit or debit card is widely accepted, easy to do, and familiar. MCX and its merchants are focused on providing consumers new, more convenient, and more rewarding, and safer ways to shop. 

CurrentC provides incentives to consumers in four important 

ways. Wide acceptance: Our owner-merchants already include national leading retailers and regional leaders in large-format, convenience, pharmacy, fuel, drug, grocery, quick, full-service dining, 

specialty retail, and travel categories. We are focused on acceptance 

in the places where consumers shop every day. Developing that 

network will give consumers the ability to shop with frequency and 

to develop muscle memory using CurrentC, allowing it to replace 

the card swipe over time while providing additional security and 

convenience. 

At MCX, we are technology agnostic. CurrentC is available on 

any smartphone regardless of model. We believe the consumer 

should have the convenience of mobile payments regardless of their 

hardware choices. And because CurrentC is cloud-based, it is easily 

transferrable should a consumer choose to change their chosen mobile device solution. 

We have also partnered with merchants to provide CurrentC 

payments network to consumers within the merchant’s own priority apps. This means a consumer can choose to access CurrentC 

directly or have the ability to garner the same benefits if they wish 

to use the merchant app which they use every day. 

Merchants value their relationships with their customers and 

want to enhance those relationships, adding value that motivates 

consumers to shop in store with faster, safer, and more secure way 

to transact. CurrentC delivers by including consumer loyalty cards 

and accounts, empowering consumers to apply offers, coupons, promotions, and when they pay in a single transaction. Our solution 

is designed to combine all those benefits instantaneously together 

in one QR code read so that a consumer no longer has to remember 

a phone number to activate their loyalty account or use their key 

chain to get discounts. 

Because CurrentC is tied directly into the POS terminals at our 

merchants, we have the ability to deliver additional benefits, such 

as item level coupons, which alleviates the need to either clip or 

carry paper coupons or discount offers, all in an effort to provide 

22 

flexibility, choice, and the ability to benefit from offers and loyalty 

directly from their handheld device. 

Currently, we are testing several discount and incentive programs in Columbus. Two of our most popular are a coupon for a 

free Frosty, which is an ice cream cone, with every purchase at 

Wendy’s, and a $5 bonus extra care box with a first purchase using 

CurrentC at CVS. What we are seeing is that to the average consumer, these are tangible motivators. 

Consumers will have the freedom to pay using a variety of financial accounts, including personal checking accounts, merchant gift 

cards, private label credit and debit cards, and general purpose 

credit and debit cards. 

MCX recently signed a partnership with JPMorgan Chase which 

will increase options available in the CurrentC wallet by enabling 

Chase customers to use their Chase cards wherever CurrentC is accepted. It is anticipated that additional general purpose credit and 

debit cards will be available in the future. 

At MCX, we are always open to adding new forms of payment 

that will provide greater convenience to consumers and allow them 

to realize the benefits and incentives of moving to paying with 

their favorite merchants using CurrentC mobile payments platform. At MCX, we are focused on leveraging innovative and secure 

technology. 

Consumers are inundated with headlines around data breaches 

and identity theft. As a result, they have become more aware of the 

vulnerability of various payment methods and technology. However, many consumers remain in the dark about how to leverage 

the latest security technologies in their everyday lives. At MCX, we 

believe it is incumbent on mobile payment technologies like ours 

not only to use the latest security technology but to help educate 

consumers on how it is working for them. We are leveraging cloud 

technology to avoid storage of any sensitive consumer information 

on the phone or transferred at the POS. Our app uses secure dynamic tokens uniquely generated for each individual transaction to 

facilitate transactions instead of constantly passing data between 

the consumer, merchant, and financial institution. In the simplest 

term, using a dynamic token means that the consumer can feel assured that their personal financial information or payment information is never stored on the device, is never stored on the merchant POS, and even if the dynamic token was stolen, it is worthless because it can never be used again. 

CurrentC was designed to ensure consumers are in control of 

their own personal security. It provides visual evidence to demonstrate that our security measures are working for them. 

Mr. BURGESS. Ms. Deckinger, let me ask you to please wrap up. 

We have other witnesses to hear from. 

Ms. DECKINGER. OK. Thank you. I will just finish this section 

and then finish. Our registration process includes several security 

questions, a four-digit PIN, and consumers can disable their phones 

easily and quickly. 

We want to reiterate our appreciation for your interest in mobile 

payments technologies and providing Merchant Customer Exchange the opportunity to share about our innovation and currently 

underway in the mobile payments space. We truly believe that moVerDate Mar 15 2010 10:47 May 20, 2016 Jkt 037690 PO 00000 Frm 00026 Fmt 6633 Sfmt 6633 C:\USERS\WLAUFERT\DESKTOP\114X105MOBILEPAYMENTSWORKING WAYNE
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bile payments will provide a better opportunity for merchants and 

consumers to experience an improved experience overall. Thank 

you. 

[The prepared statement of Ms. Deckinger follows:] 

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Mr. BURGESS. The Chair thanks the gentlelady. 

Ms. Hughes, you are recognized for 5 minutes, please. 

STATEMENT OF SARAH JANE HUGHES 

Ms. HUGHES. Thank you, Mr. Chairman. 

Mr. Chairman, Ranking Member Schakowsky, Representative 

Brooks from Indiana, and other honorable members of the subcommittee and committee who are present today, I am very pleased 

to be here with you to talk about mobile payments generally, and 

with the microphone, it will be even better—yes—and to talk about 

consumers in today’s marketplace, and I am especially pleased not 

only to be here with you but to be here with my longtime professional acquaintance, John Muller of PayPal. 

I have three disclaimers that are unique to me and a couple of 

others that relate to mobile that I think I should say. First, I am 

not here as a representative of Indiana University, so the trustees 

don’t stand behind what I say. This is my personal opinion. I am 

also not here as a representative of the Uniform Law Commission, 

although I am currently working on a virtual currency project with 

them. And I am not here as a representative of the Federal Reserve 

System’s Faster Payments Task Force, even though I am also 

working with them on that. So those are the formal usual disclaimers. 

Now the personal ones. I do use PayPal, and I use PayPal on my 

phone. I do use Square, particularly to buy tickets and buy things, 

as Mr. Muller said, at farmers markets and at arts and crafts fairs 

and to make ticket purchases, and I use both Square and PayPal 

to make charitable contributions because it is not just the Christmas shopping season that we have right now; it is also the endof-year charitable fund drive, and mobile payments are very important to charities. And as John segregated, even stationary e-commerce payments are very important to charities. 

I don’t use Apple Pay or Samsung, and the reason is because I 

don’t have a new enough phone to make an Apple Pay, and I don’t 

happen to be carrying Samsung. 

So the committee asked us to look at four questions, and in the 

interest of time, the first was whether mobile payments were disrupting other forms of payments. And I personally believe the answer is not yet. And I am not certain when that moment will come 

when that will happen, but I think that it is a question of a level 

of adoption, and I am not positive, given that mobile payments will 

continue to rely on credit, debit, and other traditional sources of 

the funds for clearing and settlements, the degree to which mobile 

payments will disrupt in the way that we typically use the term. 

I would prefer to say that mobile payments can augment. 

The second question the committee asked me to discuss was the 

security and what the technologies are. And while I agree that 

there have been some significant upturns in security, I like multifactor authorization, which we do not yet have with plastic cards 

in this country, but in other countries, we do. I like the 

tokenization options, and I like the geolocation options from a security perspective. I must be honest: from a privacy perspective, I 

don’t like the geolocation option quite so much, but that is because 

34 

I am really a privacy hawk, and so I think that that is a significant 

issue. 

The hurdles that are existing to widespread consumer adoption 

of mobile payments include something that MCX is going to solve 

by allowing ubiquitous types of utilities. But the other hurdle I believe requires significant consumer education expenses on the parts 

of the companies that are engaged in this, and I don’t know whether you noticed, but yesterday, I saw an ad, I thought, for Samsung 

on this score. And I know that there have been others, but I think 

that there is an absence of consumer education which could be significantly enhancing the opportunities in this field. 

Security depends in part on the contract between the user, me, 

and the providers. And so in addition to the Electronic Fund Transfer Act, which is older than my oldest child, who is 37, I think it 

also depends on the degree of supervision of payment processors 

who are not the providers and not chartered financial institutions 

to take good care of security in the middle. 

And the next question that you asked involved privacy in this 

ecosystem. Many years ago now, by comparison, the privacy was 

put into place in the Gramm-Leach-Bliley bill, and the banks live 

with other privacy opportunities and responsibilities that they believe are considerable. 

I would welcome any questions that the committee may have. 

Thank you. 

[The prepared statement of Ms. Hughes follows:] 

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Mr. BURGESS. The Chair thanks the gentlelady. 

Mr. Ahn, you are recognized for 5 minutes, please. 

STATEMENT OF SANG W. AHN 

Mr. AHN. Chairman Burgess, Ranking Member Schakowsky, and 

distinguished members of the subcommittee, thank you for the opportunity to testify on behalf of Samsung Electronics America. For 

today’s hearing, I would like to introduce you to Samsung Pay, 

which combines security, simplicity, and widespread acceptance 

like no other mobile payment solution. Whether it is fighting fraud 

or helping consumers zip through Black Friday checkout lines, 

Samsung Pay benefits consumers, retail merchants, and financial 

institutions. 

For consumers, Samsung Pay is accepted virtually anywhere you 

can swipe or tap a card. It is secure, easy to use, and simple. Swipe 

up—I will demonstrate on my phone. Swipe up to launch the application. Confirm your identity with a fingerprint. Hover the device 

over the payment terminal and pay. It is that simple and has the 

widest acceptance of any mobile payment service. 

For merchants, Samsung Pay helps merchants provide a secure, 

innovative, and fast payment experience. Samsung Pay supports all 

payment terminal types, including magnetic stripe, NFC, and EMV 

terminals. For financial institutions, Samsung Pay has security 

features, including tokenization and fingerprint authentication, 

that limit fraud and reduce liability. So those are Samsung Pay’s 

benefits in broad strokes. 

Importantly, our innovation was made possible by the Government’s decision to have consumers pick the winners in the mobile 

payments space without additional regulations. Going forward, 

Congress should continue to allow consumer choice to drive innovation and differentiation in this space. 

Before diving further into Samsung Pay, it might help if I highlighted Samsung’s presence in America and how our U.S. employees are contributing to Samsung Pay. Headquartered in New Jersey and with facilities in Dallas, Palo Alto, Austin, South Carolina, 

New York, and Massachusetts, Samsung Electronics America is a 

recognized innovation leader in smartphones, consumer electronics, 

IT, and home appliances. We employ approximately 15,000 people 

in America, and our $15 billion investment in our Austin semiconductor plant is the largest single site foreign direct investment in 

America. In regard to Samsung Pay, our U.S. employees have driven much of Samsung Pay’s development and success. 

Several years ago, Samsung Pay’s R&D teams examined mobile 

payments. We found that consumers would transition from plastic 

cards to mobile payments if the technology solution is, one, secure; 

two, simple to use; and, three, widely accepted at most merchants 

nationwide. We concluded that many companies can make a secure 

and easy-to-use mobile payment solution, but the trick is making 

the payment solution widely accepted by merchants. Current solutions rely on NFC, near field communications. Although NFC 

shows great promise, only a small fraction of merchants in the 

United States have adopted NFC-equipped point-of-sale terminals. 

Without the infrastructure in place for accepting NFC-based transVerDate Mar 15 2010 10:47 May 20, 2016 Jkt 037690 PO 00000 Frm 00052 Fmt 6633 Sfmt 6633 C:\USERS\WLAUFERT\DESKTOP\114X105MOBILEPAYMENTSWORKING WAYNE
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actions, consumer acceptance of NFC-only mobile payment services 

has remained low. 

Enter Samsung Pay. Unlike other mobile wallets in the market, 

Samsung Pay lets you pay at most any terminal where you can 

swipe a credit card. To accomplish this, we are using an innovative 

new technology known as MST, magnetic secure transmission. 

MST leverages magnetic stripe technology already accepted by 

more than 30 million merchants around the world. Specifically, 

MST emulates a swipe transaction thanks to a tiny coil in our 

phones that transmits the same magnetic data and code that magnetic stripe readers normally get from a credit card or debit card. 

By including both MST and NFC technologies in our phones, 

Samsung Pay enables customers to make secure payments almost 

anywhere regardless of the merchant’s point-of-sale equipment. 

Because of Samsung Pay’s wide merchant acceptance, we can 

make a meaningful contribution to payment security by enabling 

the largest footprint of secure, tokenized payments. With 

tokenization, Samsung Pay never provides a consumer’s personal 

account number to a merchant. Instead, Samsung Pay provides 

merchants with tokens yielded created by the consumer’s credit 

card company that enable the merchant to process the transaction 

without exposing sensitive customer information to potential data 

thieves. 

Samsung Pay utilizes biometrics as well, which allows users to 

apply a fingerprint to the phone’s built-in sensor to authenticate a 

transaction. Additionally, our smartphones incorporate the 

Samsung KNOX security platform, keeping all payment data 

locked and secure. 

Finally, getting user privacy right is critical. For Samsung Pay, 

we do not and cannot monitor user purchases. The transitional details areencrypted and can only be decrypted on a consumer’s device. 

Samsung wants all consumers, regardless of income, to make secure payments. No other mobile manufacturer reaches as diverse 

an audience as Samsung or offers its consumers such a wide array 

of innovative products at different price points. Accordingly, we 

closely are examining how to include Samsung Pay in a greater 

range of devices. As we do so, we would welcome your thoughts any 

input from your constituents. 

Thank you, again, for holding this hearing and allowing 

Samsung to share our thoughts and benefits about mobile payments. 

[The prepared statement of Mr. Ahn follows:] 

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Mr. BURGESS. The Chair thanks the gentleman. 

The Chair thanks all of our witnesses for providing testimony 

today and food for thought. 

We will move into now the Member question part of the hearing. 

I will begin recognizing myself for 5 minutes for questions. 

Ms. Deckinger, let me just ask you, obviously, we have heard 

from Mr. Ahn about some things that are rather device-specific, but 

you talk about being agnostic as to the type of device. So how does 

that interplay into the consumer experience having a device, any 

device, which is then able to use your product? 

Ms. DECKINGER. Thank you so much for your question. We are 

very focused at MCX on creating consumer choice and enhancing 

that, making it available to all consumers. We feel like it is very 

important to have consumers have the option to use whatever device they would like to. Therefore, we have designed our technology 

to work on all devices, all smartphones. Virtually any smartphone 

that a consumer has can leverage our technology pretty easily. 

Mr. BURGESS. I have got to ask the question. What about a flip 

phone? Some of us still have them. 

Ms. DECKINGER. We are not quite there yet. 

Mr. BURGESS. Not quite there yet. Mr. Ahn, you bring up some 

great points, and I think you heard Ranking Member Pallone talk 

about providing services to the unbanked in places where the infrastructure for check to bank does not exist, whether it be because 

of civil strife or warfare or poverty. So you actually could to some 

degree bridge that gap, could you not, with the devices that you are 

talking about? 

Mr. AHN. That is right. We have the opportunity through our 

phone ecosystem—and remember we have over 700 million devices 

in market around the world, and we are a global company—we 

have the opportunity through application to provide payment solutions that are relevant for consumers. What we are doing in the 

United States with our recent launch of Samsung Pay is providing 

an opportunity for the user, the consumer, to pay at any merchant 

location, whether it is a big box retailer, like many of the MCX 

merchants, or small mom-and-pop shops. 

MCX, as you remember, there are many partners within MCX 

that we are very close with; we are in discussions as partners. 

MCX is designed to be a large consortia of the largest merchants, 

and they are relevant and important from a consumer experience 

point of view. However, we think that we need to go beyond just 

large box retailers into mom-and-pop stores. Anywhere there is a 

transaction, we want to be there for the consumer. So that is our 

near-term opportunity. 

Having said that, I think it is the early stages of this payment 

ecosystem, and all innovations are helpful. As a rising tide lifts all 

boats, we want all innovations to succeed and move the payment 

ecosystem forward, primarily creating additional security for the 

user moving forward. 

Mr. BURGESS. Very good. Mr. Muller, let me just ask you, 

PayPal, one of the originals and I think when I ran my first campaign 13 or 14 years ago, I actually had a PayPal option as far as 

for people who wanted to support. You have probably had more experience in this space than almost anyone else. How do you leverVerDate Mar 15 2010 10:47 May 20, 2016 Jkt 037690 PO 00000 Frm 00063 Fmt 6633 Sfmt 6633 C:\USERS\WLAUFERT\DESKTOP\114X105MOBILEPAYMENTSWORKING WAYNE
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age the security? How do you add layers of security to or additional 

layers of security for the transactions for the consumers? 

Mr. MULLER. So it is always a matter of trying to add security 

with user convenience and the user experience, and that is what 

the mobile device offers in a somewhat unique way, is the way to 

improve both the user experience and security, and that is a rare 

thing in the payments field, through the kinds of technologies we 

have already mentioned, like the device location or unique device 

identifier, and do it in a way where the user controls what information they are sharing. So that is the Holy Grail we are all trying 

to achieve. And I also want to emphasize that all the same risk 

programs are still running in the background, so we don’t assume 

that there is a silver bullet type solution in security. So even if we 

do have a customer who is taking advantage, say, of the fingerprint 

authentication or device location and they pass that test, we are 

still running all these other tests in the background looking for risk 

variables in the transaction. So it is a matter of adding to risk-reducing programs that already exist, not substituting them purely 

with new types of authentication or security. 

Mr. BURGESS. Well, thank you. This is not a question. It is an 

observation. We had a hearing here not too terribly long ago about 

senior citizens who were taken advantage of by various phone solicitations. And as this technology becomes easier and more ingrained, I would just ask you to be thinking about, you have always got to stay one step ahead of the very clever thief out there, 

so to help protect senior citizens against this type of activity, do be 

thinking about what type of safeguards may be incorporated into 

the technology. 

With that, I am going to recognize Ms. Schakowsky for 5 minutes 

for questions. 

Ms. SCHAKOWSKY. So, Ms. Deckinger, we celebrated Small Business Saturday. I went to a number of small businesses, took selfies, 

in my neighborhood. So your technology right now really favors 

larger operations. Right? 

Ms. DECKINGER. At the moment, yes. We are in the early stages 

of a pilot at the moment. So we are still developing our technology 

and working to build a network that consumers can use CurrentC 

in places where they shop every day, yes. 

Ms. SCHAKOWSKY. I wanted to ask some questions about consumer privacy. 

Professor Hughes, what kind of data is collected by these apps, 

and is that data different from what a more traditional means of 

payment might collect, like a credit card? 

Ms. HUGHES. Thank you, Ms. Schakowsky. I think it depends a 

great deal on the system. Mr. Ahn has just said that Samsung Pay 

which was relatively recently introduced in the United States, does 

not have, does not allow the merchant to see any of the information, and so the authentication device does not share that information with the merchant. It operates in a more traditional way, like 

an escrow service, if I understood you correctly, for that information. You keep it, and you are passing the payment through, but 

you are not passing the consumer’s information through. 

PayPal—— 

Ms. SCHAKOWSKY. Is that a correct description? 

61 

Mr. AHN. That is correct. The way we implement today is we 

send a data package over that is completelyencrypted, and no one 

sees what is inside. 

Ms. SCHAKOWSKY. Is that unique to your company? 

Mr. AHN. No, it is not. 

Ms. SCHAKOWSKY. But it is not mandated in any way right now. 

Right? 

Mr. AHN. This is one implementation of tokenization that is prevalent in the market by leading technology companies. 

Ms. SCHAKOWSKY. OK. Go ahead. 

Ms. HUGHES. I was about to say, but I think your clarification 

was extremely helpful, that PayPal also operates in an escrow 

mode because the transaction flows into PayPal, and then PayPal 

processes the payment transaction in a way that is lots more like 

an escrow than many people believe. That is not true of every app 

that might be available, which is one of the reasons why I said 

when it comes to security and, indeed, to privacy also, it really depends on who the provider is, whether it is a branded company like 

PayPal and Samsung, whether it is an app for another purpose. 

The manner in which tokenization is employed is also very random at this stage, so there are a number of alternatives that do 

not have the same levels of security and/or customer privacy as 

Samsung and PayPal have. 

Ms. SCHAKOWSKY. You know, my experience with these kinds of 

things is that they ask you to accept the deal. And that is preceded 

by a lot of stuff on a very small device that you have to figure out 

in legalese whether or not you push accept. I would challenge almost anyone whether or not they carefully scrutinize those things 

before pushing ‘‘I accept’’ and then moving on to use. I am just 

wondering if since there are alternatives, some more secure than 

others, should there be some standardization? Should there be 

some requirements to protect consumer privacy? 

Ms. HUGHES. I had mentioned earlier that I am a privacy hawk, 

but I believe very firmly that everybody should have the privacy 

protections that Congress and many States have already provided, 

basically Congress has provided. I believe that everybody should 

have the same access to those privacy protections, but I also believe 

that one of the dynamic forces in mobile payments is the ability to 

compete to provide better than other people do. So the companies 

that are working with multifactor authentication, working with 

tokenization, that are doing, as Mr. Muller suggested, continuing 

to run their risk platforms, which are old-fashioned, artificial intelligence operations in the background that are monitoring the payments transactions that are coming through their systems. As long 

as there is a floor, then I believe people should be able to compete 

to offer better tokenization, more extensive or unique—— 

Ms. SCHAKOWSKY. That is something we are going to have to consider if we think competition based on level of risk and protection 

for consumers is a legitimate way to compete. 

I have actually run out of time, so I am going to I yield back. 

Ms. HUGHES. Would you like me to answer the question? 

Ms. SCHAKOWSKY. Yes, sure. 

Ms. HUGHES. I think the answer is right now among the various 

payment systems in the United States, there is already a broad 

62 

array of risk that relates to privacy and security. And because we 

have silos around different kinds of payments, this has been the 

constant in the marketplace back to the 1970s or the early 1960s. 

And efforts to harmonize that were not successful in the past, and 

whether they can be successful in the future remains to be seen. 

Ms. SCHAKOWSKY. Can I just say, I am not talking about necessarily harmonizing the method or the technology, but I am talking about setting a level of risk that is acceptable in the marketplace. So I need to move on. 

Mr. BURGESS. The Chair thanks the gentlelady. 

The Chair recognizes the vice chair of the full committee, Mrs. 

Blackburn, for 5 minutes for questions, please. 

Mrs. BLACKBURN. Thank you, Mr. Chairman. 

Ms. Schakowsky might be moving on, but I will just kind of put 

a comment to the end of her words. We have had a privacy and 

data security working group here at Energy and Commerce, and we 

all are focused on making certain that consumers are safe in the 

marketplace. And Mr. Welch and I have worked on a data security 

bill. And we continue to try to push this forward so that we can 

do some preemption, establish some breach notification, and bring 

some certainty to bear. So I appreciate the questions that are being 

asked around this issue this morning, and we hope that you appreciate them too. 

Ms. Deckinger, I want to come to you. Those of us who appreciate the virtual marketplace and want to see people in it, and then 

we see articles like this, and it makes you go ‘‘ouch.’’ It is the 

‘‘Apple Pay Rival and Walmart-Backed MCX Hacked, User Emails 

Snatched.’’ And this was in your beta test period. It was October 

2014. That was a Forbes article that was written about this. 

And, Mr. Chairman, I am going to pass this down so Ms. 

Schakowsky can see it because I know she is, like me on this privacy issue, very concerned about that. 

I want you to provide some information about that hack and 

what you did on resolving it. 

Ms. DECKINGER. Yes. Thank you so much for the question. So a 

subcontractor of MCX, not MCX itself, had a security incident 

where some emails were released. That subcontractor was immediately terminated as a partner. 

Mrs. BLACKBURN. How long did it take you to isolate the hack? 

Ms. DECKINGER. Immediately. We also opted to notify folks within hours of finding out, very rapidly after finding out that this occurred, and we have taken extensive precautions. Security is very 

important to us. Obviously, it is very important to our users. We 

have taken extraordinary precautions now to address any issues 

that we found with that subcontractor with additional subcontractors that we have then partnered with in the future. We continue 

to evolve our security platform and are always looking. There are 

always, as someone mentioned earlier, clever and creative criminals out there who will seek to look for data, and no security is perfect. But we are working hard to achieve a—— 

Mrs. BLACKBURN. OK. Let me pick up on that evolution in this 

process. Talk to me about what precautions you are taking around 

data security when it comes to the multifactor authentication or 

tokenization. What are you moving toward, and are you pleased 

63 

with those advances? And I am coming to each one of the rest of 

you on this panel, so get ready. The clock is ticking, 30 seconds. 

Ms. DECKINGER. So we have a cross-functional security council 

internally within MCX. We work together regularly and meet regularly to discuss the latest technology innovations, the latest security innovations. We are always evaluating what is possible to 

make things more secure for consumers, to make them more secure 

for merchants and for the app. We are always—always—implementing the state-of-the-art technology that we can, whatever is 

available for us to implement, and we will continue to do so. Obviously, the trust of consumers and their feeling of security when 

using an app is of the utmost importance, and we recognize that, 

and so we have worked to make sure that we are always sitting 

on the cutting edge. 

Mrs. BLACKBURN. OK. 

Mr. Muller? 

Mr. MULLER. OK. I think for all of us, you will probably hear the 

theme that it is constant battle and constant investment in security because the fraudsters are out there also continually changing 

their methods of attack. And so we have tried to make that investment, and it is certainly a huge part of our cost base. And then we 

also try to do what we can, first of all, to minimize data collection, 

because, frankly, if we don’t have the data, then even if we were 

somehow to be breached, it would be less vulnerable. 

Mrs. BLACKBURN. OK. Mr. Ahn, I am going to come to you. Talk 

about the Fast Identity Online Alliance and your protections. 

Mr. AHN. So the security protocols we put in place are quite extensive. What we think about is putting multiple walls up such as 

the fraudsters have to hop over many, many steps to reach the information. One of the things that we do is we have at the integrated chip level, the microprocesser alone has a way for us 

through KNOX, which is our proprietary solution, to shut down in 

the event of a rooting event. The application must be authenticated 

by fingerprint or PIN to get into the application. If the phone is 

lost or stolen, we have the ability to remotely turn off payment credentials completely and turn them back on. And when the card networks—— 

Mrs. BLACKBURN. So hold on. So you have got three tiers of 

encryption before you get to—— 

Mr. AHN. We have multiple ways of protecting the consumer information. The last one is that the card networks and credit card 

companies that we work with themselves have the ability to remotely turn on and off tokens. So what happens—and the last and 

most important piece is we purposely architected our solution to 

not store personal information and card transaction information. 

We only pass along a token. And so, for us, there is no central 

point to hack. The only information that is available temporarily is 

transaction history for the last 10 transactions on your device, and 

this one device is not a rich enough target for fraudsters. So that 

is how we view security. 

Mrs. BLACKBURN. Thank you. 

I yield back. 

Mr. BURGESS. The Chair thanks the gentlelady. 

64 

The Chair recognizes the gentleman from New Jersey, Mr. 

Pallone, ranking member of the full committee, 5 minutes for questions. 

Mr. PALLONE. Thank you, Mr. Chairman. 

I wanted to ask Professor Hughes, a consumer’s ability to dispute 

unauthorized charges on a mobile payment varies depending on the 

payment method being used. For example, a consumer’s liability for 

unauthorized charges on a credit card after a certain date is lower 

than on a debit card. Could you tell me what protections are available to consumers who do not have access to a credit or debit card 

and choose to link a mobile payment to their mobile phone bill? 

Ms. HUGHES. I believe, Representative Pallone, that you have hit 

upon the single greatest challenge from the consumer perspective. 

And this particularly affects unbanked and underbanked individuals. So the persons who are using credit cards and debit cards 

have access to two Federal statutes that have been in place, in one 

case, for more than 40 years and, in the other case, for 37-plus 

years: the Fair Credit Billing Act and the Electronic Fund Transfer 

Act. You are correct that their standards are slightly different. You 

have to report faster on an EFT transaction than on a credit card 

transaction, and your liability can be different, although Visa and 

MasterCard on the credit card side have a no-liability policy. And 

PayPal, as I remember since I am a PayPal user, does have a noliability policy, and there are other opportunities. 

The consumer, however, who is billing to a mobile phone statement, as opposed to using a financial institution for the clearing 

and settlement of the payment they are making, does not have the 

same level of protections because those are both either because 

there is a credit card present or a bank account present. And so 

the credit and debit cards are access devices to those two different 

kinds of accounts that many people who are unbanked—certainly 

they won’t have debit cards—although they may have prepaid or 

payroll cards. And the prepaid and payroll cards are increasingly 

being brought under the Electronic Funds Transfer Act. 

So the key gap at the moment is the person who is billing something to their mobile phone account without some other financial 

services provider doing the clearing and settlement for the payments. And that is the gap that exists in Federal legislation right 

now, and that is a gap that also exists in the States. 

Mr. PALLONE. So you said that with prepaid cards—and what 

about gift cards—there is some protection? 

Ms. HUGHES. That is correct. Not all of the electronic fund transfer protections currently extend to gift cards. Some of the issues 

about dispute resolution do not extend all the way through the gift 

card family at this stage, but payroll cards have better protections 

than regular gift cards do in the same environment because of efforts to bring them under the Electronic Fund Transfer Act. 

Mr. PALLONE. What do you suggest that we do legislatively, 

agency action, whatever, to have the strongest protections for all 

these different things, particularly the ones that have the lesser 

protection, based on what you said? 

Ms. HUGHES. Well, one issue which this committee doesn’t have 

is jurisdiction, so the Federal Trade Commission doesn’t have jurisdiction over carriers for that purpose, for example, and I don’t beVerDate Mar 15 2010 10:47 May 20, 2016 Jkt 037690 PO 00000 Frm 00068 Fmt 6633 Sfmt 6633 C:\USERS\WLAUFERT\DESKTOP\114X105MOBILEPAYMENTSWORKING WAYNE
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lieve the CFPB does either. The States, because of the strength of 

the Federal Communications Act, I don’t think the States have authority to do all of this work. If you wanted to do that, I think it 

would be up to Congress to instruct the Federal Communications 

Commission, giving them some additional authority to play in that 

realm, or to extend the reach, if you felt it was important, to extend the reach to persons who do not use financial institutions and 

access devices to accounts, either credit cards or debit cards, to 

have comparable protections. I haven’t thought about exactly what 

those would look like, but I think it is an extremely interesting 

topic. 

Mr. PALLONE. I have just a little time. 

With so many vendors and third parties involved in some of the 

mobile payment transactions, I was concerned that consumers 

could be given the runaround, in other words, each vendor pointing 

the finger at the other? Do you want to just comment on that? We 

only have just a little bit of time. 

Ms. HUGHES. I think that the consumers may go to vendors for 

that purpose, but I think consumers largely go to their financial 

service providers, whether, it is Samsung and PayPal or their 

bank, to get resolution of disputes. The one gap you have identified, 

sir, is the one where they are not going to have that person to help 

them—— 

Mr. PALLONE. OK. 

Ms. HUGHES [continuing]. Not in the same fashion. 

Mr. PALLONE. All right. Thank you. 

Thank you, Mr. Chairman. 

Mr. BURGESS. The gentleman yields back. 

The Chair thanks the gentleman. The Chair recognizes the other 

gentleman from New Jersey, the vice chair of the subcommittee, 

Mr. Lance, 5 minutes for questions. 

Mr. LANCE. Thank you, Chairman Burgess. 

Ms. Deckinger, it is apparent that one of the biggest hurdles to 

getting consumers to adopt a certain payment method is scale. 

What steps need to be taken in order for a payment method to be 

accepted with enough ubiquity that consumers find it to be beneficial? And, from your perspective, are there any legal impediments 

in order to make sure that this is the case that we can move forward? 

Ms. DECKINGER. Thank you so much for your question. We believe, fundamentally, that you have to have what I mentioned earlier, which is muscle memory for consumers. They are very comfortable with our current forms of payment. They are very comfortable going to a store and striping a credit card. It is not difficult 

for them. So getting them to change that behavior we believe requires having a presence at places where they shop every day and 

multiple times. 

We believe that our network includes that kind of scale and has 

that great reach. Consumers are gassing up at fuel stations several 

times a week if not at least once a week. They are at coffee shops. 

They are at their big retailers doing their grocery shopping. We feel 

like having that scale is really going to drive that adoption and regular usage that will create that muscle memory for consumers to 

get used to using a new form of payment. 

66 

I don’t currently feel that there are any legal restrictions that are 

keeping us from getting that kind of scale, but I would welcome 

other input on that. 

Mr. LANCE. Yes. Anyone else on the panel? 

Professor Hughes? 

Ms. HUGHES. I would agree with Ms. Deckinger that there are 

no legal imperatives or hurdles to the greater adoption. As I mentioned earlier in response to a question from the chairman, I believe it is one which may involve consumer education more than 

anything else. And I think that the—it may also be generational. 

And so I think it is a— millennials are much more likely to use 

mobile payments than older people. My late mother, who was very 

clever, never used an ATM, not because she didn’t feel like it, just 

because she wasn’t a particularly mechanical person, and I think 

she was comfortable with the option she had. And the comfort level 

with the options that are currently available, even though they are 

expanding, is a difference between us and other parts of the world 

where the banking system is not as robust, where the penetrations 

of the Samsung and PayPal style opportunities are not as great, 

and where, in the case of some, you have to have a smartphone, 

and a new enough smartphone to use it. You are going to see in 

older generations and in less affluent generations lots of 

smartphones, but not everybody has one. And so the mechanical 

barrier may be, depending upon the nature of the service being offered, the mechanical barrier of what kind of device you have available for this purpose, which is something that just takes a maturation of a marketplace. 

Mr. LANCE. Thank you. Mr. Muller, you said how many transactions from PayPal a year? A billion, did you say? 

Mr. MULLER. A billion in 2014. That is right. 

Mr. LANCE. And there will be more, you believe, this year, because in your last quarter, it was 350 million or something like 

that. 

Mr. MULLER. That is correct. 

Mr. LANCE. What percentage are in the United States? And what 

percentage are in Europe? And what percentage are in Asia? 

Mr. MULLER. So our largest markets overall in the world, you 

know, are by and large the English-speaking countries: U.S., U.K., 

Canada, Australia, also Germany. And in all of them, we see pretty 

comparable rates of mobile payment as a proportion of total payment, so getting toward a third of all of our payments are on a mobile device, again, usually either a phone or a tablet that is used 

where 5 years ago, it would have used a laptop or a desktop. 

Mr. LANCE. Thank you. 

Mr. Ahn, explain Samsung’s latest device. In your testimony, 

what did you say that Samsung is doing next? Samsung Card? 

Samsung—— 

Mr. AHN. So the question is with respect to our products—— 

Mr. LANCE. Yes. 

Mr. AHN. In the ecosystem? 

What we are doing today is we have reflexive devices, which we 

call Galaxy and Note. We are looking at future devices and a 

broader ecosystem where we can put Samsung Pay onto them, 

67 

whether they are additional mobile devices or even wearables. We 

are looking at a broad ecosystem. 

Mr. LANCE. A wearable would be a—— 

Mr. AHN. A watch. 

Mr. LANCE [continuing]. A watch? And you can then purchase 

items or pay for items from that device? 

Mr. AHN. That is part of our thinking. 

Mr. LANCE. Has that occurred yet, or is that still in development? 

Mr. AHN. We are evaluating and developing now as we speak. 

Mr. LANCE. Thank you. And thank you for making New Jersey 

your headquarters in this part of the world. We deeply appreciate 

that. And I have been at your world headquarters in Seoul and 

have been deeply impressed with them. 

Thank you, Mr. Chairman. 

Mr. BURGESS. The gentleman yields back. The Chair thanks the 

gentleman. 

The Chair recognizes the gentlelady from New York, Ms. Clarke, 

5 minutes for questions. 

Ms. CLARKE. Thank you, Mr. Chairman. And I thank our ranking 

member. 

Transparency. Unlike simple cash transactions, using a mobile 

payment system can bring in unseen third parties. So Professor 

Hughes, it seems like there are often many entities involved in mobile payment transactions than consumers may realize. How can 

we assure consumers know who is involved in their mobile payment transaction apart from themselves and the service that they 

are directly interacting with? 

Ms. HUGHES. Representative Clarke, that is a very interesting 

question, and I believe it is one to which we do not have a very 

clear answer. So I think that there are systems that operate, particularly apps, not services of the kinds being offered by PayPal 

and Samsung. And where the app is involved, it is much more likely that there are unknown third parties involved in processing for 

the merchant, particularly, because merchants use a lot of thirdparty payment processors. And third-party payment processors are 

among the least regulated entities in the payment space today. 

They are not very well regulated by the States. Some of them are 

regulated as money transmitters; some of them are not. And they 

are not particularly well addressed by congressional legislation to 

this point. 

Asking the merchant, for example, or the app provider to make 

that kind of disclosure could possibly be more burdensome than it 

would be worth. So I think it is more important to ask—and each 

of these groups and others do—for people to engage in robust supervision of the choice of providers that they use along a tract that 

may be involved and to supervise them appropriately for risk-management purposes. 

The members of this panel might not be excited, but you might 

care to read a study that was issued in August of 2015 by The 

Clearing House payments company on, which I would be happy to 

provide to your staff if someone tells me to which person it should 

be sent. That study talks about this issue in particular in greater 

depth than I have time to do this morning or you do. And so I 

68 

would suggest that it might be something that you would read on 

that particular narrow subject, which is quite an important one. 

Ms. CLARKE. So let me—— 

Ms. HUGHES. I urge you not to make it too complicated because 

people choose providers based on their histories with them, and it 

would be very difficult to make new disclosures constantly if you 

had to abandon a provider because they didn’t behave appropriately and choose a new one—— 

Ms. CLARKE. I think we are concerned more about breaches. You 

know, you are then dealing with many more entities that are holding the data, right? 

But let me move to ask about lack of transparency and consumer 

consent, the notion of consumer consent. 

How can consumers consent to business relationships with entities that they are unaware of? 

Ms. HUGHES. Well, Representative Clarke, that is a very complicated question. And I think that as there are already lots of payment processors operating in the United States where we are not 

seeing a lot of transparent consent, I think that it may be the necessary level of consent, maybe the consumer who chooses the payment method and the consumer who chooses the merchant at this 

point. And I firmly believe that the mechanics of this are such that 

we should put the primary focus on the merchant to choose wisely 

and on the payment provider to choose wisely and to ask them to 

perform the functions that are currently present in Federal and 

State law to supervise them. 

Ms. CLARKE. Do you believe that greater transparency could encourage more consumer use of mobile payments? Because, certainly, consumers who are unwilling to use mobile payment services may feel unsure about who will have access to their data afterward. 

Ms. HUGHES. That, too, Representative Clarke, is an excellent 

question. And I think the more that consumers understand how 

mobile payments work, as a general, as opposed to a specific proposition, but perhaps both, the more they are likely to be willing to 

use them because just like ATMs 40 years ago, there was a period 

of adoption, and it made a difference when consumers—— 

Ms. CLARKE. But ATMs don’t have a third party. You know you 

can just walk into that—— 

Ms. HUGHES. Some do, actually. 

Ms. CLARKE. Absolutely, right. Absolutely. Clearly. 

Ms. HUGHES. Kiosks in stores and other places have a landscape 

and an ecosystem that is very much like mobile payments today. 

So the answer is, but there, you are talking about your bank, and 

you are talking about the place where you use the machine, assuming you remember where it is, and it is usually on your receipt. So 

I am not sure that that is so much different than what consumers 

are already dealing with with a fair amount of comfort. I just think 

they need more education. 

Ms. CLARKE. I yield back. Thank you. 

Mr. BURGESS. The gentlelady yields back. The Chair thanks the 

gentlelady. 

The Chair recognizes the gentleman from Mississippi, Mr. Harper, for 5 minutes, please. 

69 

Mr. HARPER. Thank you, Mr. Chairman. And thanks to each of 

you for being here. 

I guess I would have to say that I never envisioned the title of 

mobile payments would be exciting, you know. So it is an incredible 

topic, and it is affecting our lives in so many ways as we look at 

this. And so I am all in. This is a great topic. 

Mr. Muller, if I could start with you. In your testimony, you mentioned that PayPal has been involved in mobile payments innovation since the PalmPilot devices. What have been some turning 

points that you have seen in the development of mobile payments 

from PayPal’s perspective, and what are the next big applications 

that we should be on the lookout for? 

Mr. MULLER. So, you know, like most companies, there have been 

some successes but also some learning opportunities. One was, as 

I mentioned, the switch away from the PalmPilot as the focus towards email and Internet connection. A second generation really 

starting, I think, in 2006, we launched a mobile payment feature 

available to users to make payments mostly intended for person to 

person, but a few also businesses had signed up using text message 

and just sending a text message with the amount and a certain 

code in it. And that, frankly, was not very successful I think largely 

for some of the reasons that have come up about security and many 

consumers just feeling a little bit too uncertain that just by pushing a text message, the money would go to the right place and be 

credited correctly. 

So that—— 

Mr. HARPER. Does that mean it was too simple to give confidence? 

Mr. MULLER. Well, I think perhaps to some degree, I don’t know 

if too simple or simply too unclear, too little information associated 

with the actual transaction itself. And this was at a time just before the iPhone. So we are still talking about flip phones and other 

types of phones with very small screens. 

So the whole texture of the experience, to some degree, was not 

as comforting as is available today with smartphones and larger 

screens. 

So I think we have learned that lesson, and a big part of what 

we have done that got to us to the 1 billion transaction number 

that I mentioned is not just building mobile apps and experience 

on the consumer side, but also helping our merchants, who are, by 

and large, mostly small- and medium-size businesses optimize their 

Web site and their checkout pages for mobile devices so that the 

experience is as good as it can be on the smaller screen. 

Mr. HARPER. So what is the next big thing to look for? Where are 

we headed? 

Mr. MULLER. Well, so one thing that is already live for us—and 

it is an experience, again, that many other payment companies are 

also in their way matching or trying to—is what we call the onetouch experience, taking advantage of the information that the consumer has chosen to share with us, recognizing them the next time 

they go shopping even at a different merchant than they have 

shopped at before. We can recognize them so they don’t have to 

type in information on a small screen. We can recognize them if 

they have chosen to opt into this feature and, again, improving 

70 

both the shopping experience and the merchant checkout. And then 

the other set that is coming out, say, is at the point of sale, where 

to date, you know, certainly PayPal is less prominent, but finding 

that right match of convenience and merchant acceptance and 

speed and security, something all of us are working on, and that 

is coming. Just who unlocks the right combination is yet to be seen. 

Mr. HARPER. You know, our time is almost up. But one phrase 

that was of interest was in your testimony; you note that 17 of the 

100 most unbanked places are in Mississippi. How do you envision 

mobile payments increasing consumer options in those communities? 

Mr. MULLER. So that is another challenge for the industry as a 

whole that we are eager to take on and do more. Today, I would 

say, really, that the primary vehicle linking the unbanked to mobile transactions is through prepaid cards or prepaid accounts of 

different kinds that different providers are offering. You know, and 

there are, of course, starting with the baseline that many of the financially underserved today do have smartphones. 

Mr. HARPER. Mr. Muller, I apologize. My time is well over. 

Mr. Chairman, I yield back. 

Thank you, Mr. Muller. 

Mr. BURGESS. The gentleman yields back. The Chair thanks the 

gentleman. 

The Chair recognizes the gentleman from California, Mr. 

Ca ́ rdenas, 5 minutes for questions, please. 

Mr. CA ́ RDENAS. Thank you very much, Mr. Chairman. And thank 

you to all the witnesses that are here enlightening us of what has 

been, what is, and even what may be coming in the future. 

But I think the main concern of this committee is the safety and 

security of Americans and people in our country, whether they are 

visiting or what have you, making sure that they feel comfortable 

and confident that we have a system that actually works and hopefully works for as many people as possible. 

Speaking of as many people as possible, there are still many 

communities here in the United States of America that are underbanked and underserved by financial institutions and instruments, 

et cetera, so they tend to not experience or see the safest and best 

technologies and, unfortunately, sometimes actually are subject to 

more problems because they don’t have the best systems available 

to them. 

That being the case, when it comes to these kinds of communities, how can mobile payment providers better reach minority 

communities and underserved or poor communities and ensure that 

these consumers also enjoy the safe and community commerce that 

everybody else expects or can experience? 

The main thing there is, certainly, if there is a community with 

a lot of wealth and a lot of activity and probably a bigger contributor to the billion transaction mark, you have other communities 

that want to participate, yet, at the same time, how do we make 

sure that we have an even system that is available to them, really? 

Professor? 

Ms. HUGHES. Well, I think this is a truly important challenge. 

And I think that mobile payments are an enormous opportunity to 

help unbanked and underbanked individuals. Unbanked individVerDate Mar 15 2010 10:47 May 20, 2016 Jkt 037690 PO 00000 Frm 00074 Fmt 6633 Sfmt 6633 C:\USERS\WLAUFERT\DESKTOP\114X105MOBILEPAYMENTSWORKING WAYNE
71 

uals don’t have bank accounts. Underbanked individuals may just 

not have a bank very close by. And if we think about the ability 

of someone to make a payment remotely or to take a payment from 

an employer or to pay their rent using their mobile device and not 

having to take time off from work to do that or to take time to go 

to the bank to deposit checks and the like, I think that the underbanked communities that have bank accounts or other credit union 

accounts, et cetera, but may not have time to get there during reasonable work hours are among the communities that will benefit 

the most from mobile payments. 

I think the opportunities in those markets are huge. I think they 

will help the citizens of Mississippi and California and the other 

jurisdictions that are here. They will help inner city people as well, 

people who no longer have a corner branch of a bank to help them. 

And because, as Mr. Muller suggested, there are opportunities to 

use prepaid cards, including payroll cards, and to spend money out 

of them using devices of this kind, the opportunities for unbanked 

and underbanked persons and minority individuals residing in 

rural or very urban communities expand. 

The last thing I would say, sir, is that the least secure thing on 

the face of the planet in the United States, as least, is cash. So if 

you have a way to link to some form of an account and to use it 

as if you were using your bank account through a mobile payment, 

you may level the field for lots of people to participate in commerce, 

both the recipients of payments and as people who can make payments on time and, therefore, avoid late fees and other charges 

that are associated, and that these opportunities are enormous for 

helping a lot more Americans have a lot better access to payment 

options than they have had in the past. 

Mr. CA ́ RDENAS. Well, my last question, because our time is limited, is it is interesting that ‘‘60 Minutes’’ talked about this payment system in Kenya that you touched on, Mr. Muller, that has 

to do with the texting, and it doesn’t have to be a smartphone, et 

cetera. The thing that concerns me about that isn’t that it is kind 

of cool; it is that I would imagine that the safety of those individuals in those transactions are a lot more vulnerable than, perhaps, 

what Americans understand that we are not as vulnerable with the 

systems and the advances we have. 

I would like to know, as quickly as possible, due to constraints 

of time, the fact that in this country, we do have regulations and 

we do have benchmarks and push industry to make sure that they 

have safeguards for our consumers and our participants, is that 

something that is helpful to the industry? Or is that something 

that you can do without? 

Mr. MULLER. So I would say, certainly, it is helpful, in general, 

of course, the right kind of regulation. But, in general, regulation 

is certainly one component that leads to consumer adoption. And, 

as you said, if people viewed these kinds of transactions as really, 

the same as cash with no purchase protection or no protection 

against unauthorized transactions, they would be much less inclined to use it. 

So regulation is one component of addressing that issue. Industry 

efforts, like Visa and MasterCard and PayPal, zero liability, all 

come together to lead to the broader mobile adoption for all of us. 

72 

Mr. CA ́ RDENAS. Thank you. 

I yield back my time. 

Mr. BURGESS. Thank you. The gentleman yields back. The Chair 

thanks the gentleman. 

The Chair recognizes the gentleman from Kentucky, Mr. Guthrie, 

5 minutes for questions, please. 

Mr. GUTHRIE. Thank you very much. It is neat having this hearing today. I was flying back yesterday reading a biography of Andrew Jackson, and it is amazing moving an army, speculating land, 

all the others things that he did. One of his biggest concerns was 

always how did he move currency, cash, how did he pay people. 

Was it going to be barter, bank drafts? It was just a big issue then. 

And so how currency moves really played into how he was able to 

move his armies and so forth back and forth. So we are still talking 

about moving currency, and how we move it in the best and most 

efficient and safe way. 

And I was watching, I guess, a football game or so this weekend. 

And Samsung had their advertisements. They must have bought a 

lot of time because I remember seeing the app that we are talking 

about here today. And I grew up in a rural grocery store, so I always view things through rural, kind of, groceries. So it appeared 

that anywhere that you can do a credit card, your phone would 

work. So if you can pay at a pump, then you can actually scan or 

whatever the technology is, if I am using the right term, then your 

phone works in all applications like that? So if any merchant takes 

a credit card, then you have the ability to use your application? Is 

that—— 

Mr. AHN. So, Congressman, thank you for the question. When we 

say virtually anywhere, what we are talking about is very, very 

high percentage of locations and terminals that accept any credit 

card or debit card. However, we say ‘‘virtually’’ because we are not 

fully 100 percent there. There are instances such as DIP readers, 

gas stations, ATMs, and a small percentage of merchants where 

the technology software needs to be upgraded for us to get to everywhere. And so we are not quite there yet, but we are substantially 

ahead of our competition. 

Mr. GUTHRIE. Well, thank you. 

My first question was your level of mixes of security and how it 

protects consumers. You answered that with Mrs. Blackburn, I 

think. 

So does it prevent the consumer from doing it to themselves, I 

guess we would say? Are there things the consumer needs to do? 

Once they use your phone, your phone is—can the consumer—like 

if, the old days, when you swiped a debit card and you didn’t throw 

the receipt away and somebody took it out of your garbage or you 

didn’t tear it up, is there something like or equivalent to that the 

consumer can do, or have you protected them from all aspects? 

Mr. AHN. So the consumer is essentially protected behind a level 

of password protection and fingerprint indication that is required 

to open up the app. And, therefore, everything that they are doing 

is really sitting behind that level of protection. We don’t publish 

that information. It is not easily accessible. And the consumer really has full control over that. So, to that extent, it is secure. 

73 

In terms of usability, I think all mobile payments have usability 

issues because people are—for the most part, their muscle memory 

today is credit card and debit swipes, and so it is going to take the 

ecosystem to work together to help educate consumers about the 

advantages of having more secured payments and a new way of 

tapping, a new way of paying. This is happening in different parts 

of the world. Western Europe, for example, is actually more tapcentric payment countries. In the U.S., we are further behind. 

However, you know, as a technology company, we are very optimistic about technology advances. Five years ago, the cell phone, 

smartphone penetration was very different than it is today. New 

applications of services are quickly adopted if they are helpful and 

make an impact. So we are hopeful that there is enough security, 

utility, and a better experience to compel consumers to move toward a more technology-centric way of paying. 

Mr. GUTHRIE. Thank you. 

And, Mr. Muller, I understand that PayPal utilizes the cloud for 

storage of consumers’ payment information. And why did you 

choose to utilize the cloud instead of storing payment information 

on the phone or the app? Is it more secure, I guess, is the question 

I am getting at? 

Mr. MULLER. Well, for us, it was partly out of necessity in that 

we don’t have the same access to mobile phone hardware and operating system that some of the other companies that are operating 

point-of-sale payments through a mobile device do. But, also, we do 

think there are some advantage of storing the information in the 

cloud and not—certainly not storing any of the information on the 

device. I mean, that is clear, and that is undesirable. But, also, we 

don’t have the same access to the device as the handset manufacturer might. 

Mr. GUTHRIE. So being in the cloud, you are obviously—PayPal 

is not a device. You are not device-specific. That is your—— 

Mr. MULLER. Yes. 

Mr. GUTHRIE. So what innovations have you seen over the last 

year or two that would make online payment data more dynamic 

and less useful for criminals? 

Mr. MULLER. Well, so, certainly, tokenization continues to develop. It just started, so it is certainly not static by any means. But 

the first, really, live implementation of tokenization in a practical 

way that we have seen is a big step forward, and the controls that 

can be built in for one-time use of the token, merchant-specific use 

of the token, all those are certainly, a step forward compared to 

where we have been with the primary account number being stored 

and transmitted in many ways. So that is probably a major recent 

development. 

There are new ones coming out all the time that we read about. 

So it is an exciting field with, certainly, dynamic codes. Sort of the 

three-digit or four-digit code in the back of your card that you are 

used to entering, now companies are coming up with a capability 

to generate that dynamically and change it for every transaction. 

So certainly new developments are coming out, and there will be 

more to come. 

Mr. GUTHRIE. Well, thank you. And I only have 15 seconds. I am 

not going to ask another question. 

74 

I yield back, Mr. Chairman. 

Mr. BURGESS. Thank you. 

Mr. Kinzinger. 

Mr. KINZINGER. Thank you, Mr. Chairman. 

And thank you, all, for being here. I appreciate it. The innovation 

of mobile payments is at the forefront of many consumers’ minds, 

especially those that were considering purchasing a new 

smartphone and all consumers interested in the technology to ensure their transactions are safe and secure. 

Like with many new technologies, it is subject to some suspicion 

before adoption, and many consumers want to know if their personal information, including financial and personal health information, will remain protected and private. 

Certainly, no system is foolproof. In the technology world, we frequently read about cyber attacks and successful hacks of various 

systems. Consumers have a right to be concerned about new technology, but I am hopeful that today’s conversation will showcase 

some of the great strides in technology that we have made and 

what its future could look like. 

Mr. Muller, the number of smartphones in the U.S. continues to 

grow, and obviously, mobile payments are increasing in popularity. 

Over the course of PayPal’s involvement with mobile payments, 

what have been the largest keys to consumer adoption, and what 

have been your biggest challenges? 

Mr. MULLER. So, certainly, one of the keys is the one you mentioned, which we certainly can’t take credit for, but is the proliferation of the smartphone and the affordable smartphone through the 

work of the handset manufacturers and the mobile carriers, and 

that is probably—that is the baseline for all adoption that we have 

been talking about. 

And then, really, there is just the passage of time, as we have 

seen with other payment devices. Professor Hughes mentioned the 

ATM card, the credit card, the debit card as a purchase device. 

Consumers get comfortable through word of mouth, through— 

there are always early adopters, and that is one of the things we 

are lucky to have in the U.S. is people who are eager to try new 

things, and if it works for them, to spread the word. 

And then, ultimately, another important factor has been merchant adoption and getting the merchants to realize this is something that is good for them as well. It creates a good experience for 

their buyers and ultimately more transactions for them. And so 

just that extra nudge from some of the merchants to encourage 

their consumers to try their app on the mobile phone, that can be 

the deciding factor for many consumers. 

Mr. KINZINGER. And you also, you know, you obviously, described, that when you started up, you called it, basically, an early 

form of tokenization. Very like 50,000-foot level. Can you just briefly describe how your security methods have evolved over the years 

from 16 years ago to today? I know we can talk for hours about 

it, but—— 

Mr. MULLER. Well, as I said, the basic component and what we 

were referring to as that early form of tokenization is just not creating a process where the merchant receives the card number in 

the first place. So, with PayPal, they receive news of the payment 

75 

in the form of either an email; or, for some more advanced merchants, they might receive an automated notice to their systems; 

or they can just go look at their account to see that the payment 

is there. But, in any case, they are not receiving the consumer’s 

card or bank account information to start with. So that is a similar 

concept to what tokenization is now achieving more broadly. 

That, of course, makes it incumbent upon us—we are receiving 

the account information—to protect that account information. We 

had the good fortune, as one of our founders was and still is a computer security expert and designed the system in a solid way. And, 

of course, as I said earlier, continuing to make investments on that 

foundation for both encryption of the data and limited access even 

by employees to the data. 

Mr. KINZINGER. Well, Mr. Ahn—I hope I said that correct—some 

of the security concerns that I have heard raised with the NFCbased mobile payments has been eavesdropping, data manipulation, interception attacks, relay attacks, and device theft. Can you 

discuss if these are real concerns or misconceptions and perhaps 

how the Samsung Pay approach addresses some of these? 

Mr. AHN. Some of the concerns you mention are real; some are 

misconceptions. The real concerns are related to device theft and 

loss that relate to relay or replay attacks. There are a number and 

a host of ways that fraudsters can steal information, and our job 

is to be ever-vigilant and put the best and most advanced security 

features in cooperation with our partners, with banks, the Visas, 

MasterCards of the world, the networks, and make sure that we 

have as much fortification as possible. 

With respect to Samsung Pay, we have looked at every possible 

angle of security, and it starts, again, as I mentioned before, at the 

baseline level, moves all the way up. We are very, very concerned 

about security. 

As a matter of background, Samsung is one of the most respected 

brands around the world. We have a very strong relationship with 

a large base of consumers. That relationship and trust and brand 

is sacrosanct to us. We will not jeopardize it. And so when we think 

about what we put into market, we will index heavily toward security. And, yet, as a viable consumer solution, we have to have it 

usable and simple. And so that is our challenge and our burden to 

bear. 

And so we take that very seriously, and we would be happy to 

share addition information in more detail. 

Mr. KINZINGER. Thank you, Mr. Chairman. Thank you for your 

leniency. I yield back. 

Mr. BURGESS. Thank you very much. 

Congresswoman Brooks. 

Mrs. BROOKS. Thank you, Mr. Chairman. 

This past August, I had the opportunity to visit Tanzania, Africa, 

where I saw the majority of the population utilizing mobile payments and paying for everything from cabs to a dinner tab to hotel 

stays, and so the mobile payment technology I think is incredibly 

advanced in Africa. And we know that in a large part of sub-Saharan Africa, traditional banking has been hampered by a lot of infrastructure problems and transportation. And we now know that so 

many people worldwide, approximately 2.5 billion people, don’t 

76 

have formal accounts at financial institutions, as Professor Hughes 

touched on. It is allowing these communities to provide for the 

unbanked and the underbanked individuals and businesses to conduct business. 

And so I am curious, though, how it is that Africa, in many ways, 

has leapfrogged over the United States in using this technology? 

And it was being used in the smallest of shops and to the large hotels. And so I am curious, particularly, for anyone with any—companies with the international background, how and why did that 

happen? Mr. Ahn? 

And what should we be thinking about in seeing that, you know, 

other countries—and I am talking about visiting with people in 

huts that didn’t even have significant access to electricity at times. 

And so a lot of them were charging their phones with solar-powered devices and so forth. But how is it that Africa has, I think, 

advanced so much faster than we have? 

Mr. AHN. So, Congresswoman, one thing I would add is the examples in Africa highlight that necessity is the mother of invention. In Africa, the financial institutions and the infrastructure for 

typical banking is at such a state of underdevelopment that those 

in need of payment remittance, access to funds, needed to find 

some other way to move money around, pay each other, and to conduct commerce. And so these payment solutions on pace in Kenya 

and other leading applications leapfrogged the need for established 

banking institutions in such a way to create viable payment commerce. 

And I think the relevant piece of what we have learned in developing countries for us is the question that the Congresswoman 

asked earlier with respect to how we serve our underbanked populations and provide access to as many people as possible for these 

payment solutions. 

For us, we argue that mobile changes everything. Mobile does 

not tie you down to location or place. 

As Ms. Hughes was saying, you can, at your own time, at your 

own choosing, and location, conduct transactions and services that 

are important to you and have access on a more equal playing field 

than if you were tied to time and place. And so when mobile is 

coming into the picture, we believe that our job now is to then open 

up access to the services and solutions that we can make an impact 

for consumers. The way we think about it is we have a large device 

footprint. We want, as I mentioned in my testimony, we have plans 

to continue to evaluate broader ways to provide Samsung Pay on 

more devices. One very easy way to do so is when previous generation phones are in market, they come down in price point, making 

it more accessible for different consumers. In addition, we know 

from our own data that Samsung as an OEM has one of the highest percentages, if not the leading percentage, of share of market 

in underserved populations as well as lower income populations. 

And then, on top of all of this, the way we have constructed our 

solution is to open our doors for all payment types. What that 

means is that we can support credit cards, debit cards, prepaid 

cards. We will roll out in the near future gift cards. We have every 

opportunity for any payment instrument in any tendered type to be 

usable in our device. So that is how we think about this. 

77 

Mrs. BROOKS. Thank you. 

Professor Hughes, I am curious what you believe the impact is 

going to be for this type of payment method for the—is there going 

to be any burden of entry for entrepreneurs who are just starting 

businesses, or do you think this will be beneficial to them? 

Ms. HUGHES. Congresswoman Brooks, I think this is a boon to 

small business. I think, as I mentioned earlier, it is a boon to farmers markets and artisans and music festivals like we have in 

Bloomington, Indiana, and arts organizations and charitable causes 

around the country. I think particularly for smaller businesses, this 

is an enormous advantage because it will allow them to take payments that they may not have been able to take before in a speedy 

and secure environment. 

And I think that we should be optimistic about the future of mobile payments and their ability to serve underbanked, unbanked, 

and small business. 

Mrs. BROOKS. Thank you. Thanks for your testimony. 

I yield back. 

Mr. LANCE [presiding]. Thank you. 

Mr. Olson. 

Mr. OLSON. I thank the Chair. 

And welcome to our witnesses. 

I have a challenge for you, Mr. Ahn, Ms. Deckinger, and Mr. 

Muller. In preparing my questions for this morning, this testimony, 

I relied on advice from people here in DC, lots of folks back home, 

and two of my own personal experts, my two teenagers, my 18- 

year-old daughter and my 15-year-old son. They are all about mobile. That is all they know. And they are current and future consumers, big consumers. 

So, Mr. Ahn, can you explain how your mobile technology works 

that I can show my daughter and my son, explain to them and 

their friends, ‘‘Hey, Samsung has got this great vision’’? What can 

I say to my kids? How could you explain it in English? 

Mr. AHN. So, apparently, the previous testimony was—— 

Mr. OLSON. No, it was good. It was good for DC. I want to make 

sure my kids understand this because they are the future. 

Mr. AHN. So the young population is an important demographic 

to follow. What they do and what their habits are, are leading indicators of what new consumer trends will be. For them, what is important is the ability, I think, to focus their life around services 

and goods that revolve around mobile devices. Our view is that we 

want a future where consumers have the ability to pay in a store 

offline, inside an application, an app, let’s say an Uber, or a mobileWeb context. Anywhere you are, in any space that you are, we 

want you to be able to pay with the secured credentials that you 

have loaded. So we have that opportunity as we build out our product roadmap. 

What the Samsung phone allows you to do is to take a credit 

card or debit card or any other payment instrument, put it into the 

phone, and make a secure payment at the terminal. Over time, we 

expect to create more intelligent services that create more consumer impact, things that we can’t discuss today. But over time, 

we expect that the ability to pay in a secure method with a phone 

78 

allows you—allows us to open the door for new innovations that 

will have a direct impact for them. 

Mr. OLSON. Is there any PII left after—PII, personal identifying 

information—after a transaction with your mobile system? 

Mr. AHN. There is no PII except for you do know that the phone 

belongs to a certain user; traditional information is already there. 

But no additional information is left. 

Mr. OLSON. Mr. Muller, same question. Explain to my kids, how 

does PayPal’s system work, and is there any PII involved after the 

transaction? 

Mr. MULLER. So, PayPal’s system, you know, works somewhat 

differently, or it is not tied as closely to the physical device. It does 

involve working through an account that has to be set up to start 

with either by the individual themselves if they are over 18, since 

that is one of our rules—— 

Mr. OLSON. One is there, one is not. 

Mr. MULLER [continuing]. Or by their parents. We do offer a student account capability where parents can control an account on 

behalf of the student. But there is that initial step of setting up an 

account. Once the account is set up, we then have a broad network 

of merchants that the user can access through their mobile device, 

through their laptop, or other kinds of device. So it becomes very 

easy to make that payment once that initial step of setting up the 

account. 

Mr. OLSON. Any PII left over after a transaction with PayPal system? 

Mr. MULLER. So, you know, the PII is something that is kept 

only by us, so we do have it, and we do have the information, and 

then the merchant has what they need. If they are shipping physical goods, inevitably that means they need a physical address to 

ship it to. 

But, really, that is the extent of the information. 

Mr. OLSON. And, Ms. Deckinger, you are the new kid on the 

block. How does currency envision its testing phase, and can you 

explain how your mobile technology works for my daughter and 

son? 

Ms. DECKINGER. Yes. We have some pretty cool technology—— 

Mr. OLSON. I like it already, the word ‘‘cool.’’ 

Ms. DECKINGER [continuing]. That would help ease the path. One 

of the great things we have, for example, is Pay at Table. So that 

frustrating experience when you are at the end of the transaction 

in a restaurant, sitting in a restaurant, and you want to pay your 

bill and you are waiting for the server to come over and bring your 

bill, we allow you to scan the QR code that is on the receipt, pay 

and leave without having to do that. We allow to you stay in your 

car when it is 100-plus degrees in Texas and pay from the comfort 

of your car. 

Mr. OLSON. Thank you. 

Ms. DECKINGER. And we allow to you pay at the drive-through 

without handing a card out the window to the person on the other 

end. Pretty cool thing, the phone actually that when you pay at 

drive-through is pinged through the Bluetooth low-energy beacon, 

so that is a fairly cool technology that your teenagers will find fascinating. And PII was the other question. 

79 

Mr. OLSON. That is a—yes, ma’am. How are you guys planning 

on protecting that if you have any after-transaction left over? So 

like Mr. Muller—— 

Ms. DECKINGER. Similar to Mr. Muller, there is some PII involved. However, we do not pass any financial information through 

the transaction. So we use tokenization, everything from a financial perspective is tokenized and encrypted. So that means that 

there is never any financial information stored on your phone, nor 

information that is of worth to anybody to store on your phone. So 

should your phone be stolen or hacked or taken by someone nefarious, nothing can be done with it. 

Mr. OLSON. Thank you. My time is up. My kids would be very 

happy. Thank you, all. 

Mr. LANCE. Thank you, Mr. Olson. 

Mr. Welch. 

Mr. WELCH. I got here a little late. I missed—would you like me 

to comment? 

Mr. LANCE. Very good. 

Is there anyone else who would like to ask questions? 

Thank you. 

I thank each of the members of the panel for participating. I 

think this has been a very interesting and informative hearing. Before we conclude, I include the following documents to be submitted 

for the record by unanimous consent: a statement from the Electronic Transactions Association; a statement from the National Association of Convenience Stores and the Society of Independent 

Gasoline Marketers of America; and a statement from the National 

Retail Federation. 

[The information appears at the conclusion of the hearing.] 

Mr. LANCE. Does the ranking member have anything that should 

be included in the record? 

Mr. SCHAKOWSKY. I don’t, but I approve all those inclusions. 

Mr. LANCE. Thank you. Pursuant to committee rules, I remind 

Members that they have 10 business days to submit additional 

questions for the record. And I ask that witnesses submit their responses within 10 business days upon receipt of the questions. 

Without objection, the subcommittee is adjourned. 

Mr. SCHAKOWSKY. Thank you. 

[Whereupon, at 12:15 p.m., the subcommittee was adjourned.] 

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