Jim Cunha 

SVP, Federal Reserve Bank of Boston 

FDIC Advisory Committee on Economic Inclusion 

December 1, 2011

Mobile Payments and Econom

Inclusion 
Agenda

2

 Why mobile payments matter for economic  State of mobile payments in the US  Mobile Payments Industry Workgroup effort Benefits mobile can help attain  Challenges still ahead 
Why Mobile Payments Matter for 

Economic Inclusion ? 

3

 Transaction processing (check cashing, sto

value, payments) is the most fundamental 

 Once adopted, transaction processing can 

next steps up the economic inclusion laddeaccumulation and financing 

 Mobile solutions can be leveraged by provi

banked and un/underbanked creating greavalue 
State of Mobile Payments

4

 Mobile payment adoption is strong in some f

markets for person-to-person (P2P) and rempayments

 U.S. markets have focused on mobile bankin

payments – banks leveraging existing online 

 2010-2011 seeing growing emphasis on com

partnerships and pilots for mobile payments 

 But, still no significant implementations 
Evolution of Mobile Payments In

Workgroup (MPIW)

5

 Industry concerned with fragmentation, lack of commu

between key stakeholders around direction of mobile pin the U.S.

 Federal Reserve viewed as neutral organization capab

facilitating a diverse group of mobile payment stakehointerested in understanding direction of mobile payme

 Boston and Atlanta Reserve Banks convened group in 

2010 to facilitate discussion on evolution of mobile paU.S. retail payments space 

 Group (self-named Mobile Payments Industry Workgrou

comprised of invited representatives from organizationmobile payments value chain
Mobile Payments Industry Workgroup Stru

6

Banking System Participants Financial Institutions Payment networksPayment processors & online payment service providersPayment & merchant trade associations

Technology Participa Major mobile carri Mobile handset, c

security vendors

 Software solution  Mobile trade asso

 Co-chaired by FRB Boston and Richmond Involves many stakeholders from multiple industries
MPIW Objectives

7

 To understand the evolution of mobile payment

U.S. retail payment space

 To establish relationships, discuss roles, assess 

challenges, find points of mutual value, share idbuild consensus in a non-binding, free market f

 Determine if there was a shared vision for the “

game” of mobile payments and determine what existed to achieving it. Then share that knowledbroadly

 Not explicitly focused on unbanked
Principles of a Successful U.S. M

Payments Framework

8

1) Mobile device used to initiate and receive payme

purchases between consumers and/or business

2) “Open mobile wallet” that supports multiple paym

options (credit, debit, bank account, prepaid/stovalue, etc.) in a secure container

3) Near Field Communications (NFC) technology for 

contactless mobile payments at point-of-sale, witenabling phone applications

4) Payments cleared and settled over existing chan

(credit, debit, prepaid, ACH, mobile); open to futuchannels
Principles of a Successful U.S. 

Mobile Payments Framework

9

5) Dynamic data authentication for security6) Standards developed for the U.S. based on evol

global standards and an industry supported certprocess

7) Regulatory clarity for ongoing oversight establish

between applicable agencies

8) Trusted Service Managers (TSMs) provision secu

elements in the mobile phone
Mobile Payment Ecosystem is Co

10

Each party views its responsibilities & liabilities 

differently but success requires collaboration
Benefits Mobile Can Help Atta

11

 Accessibility  Convenience Control Security  Technology creates opportunity to educate and change be

decision points 

 Richer functionality and value added services can be prov

mobile device

 Products (especially transactional) can be leveraged acros

banked/unbanked providing economies for providers 
Challenges Still Ahead 

12

 Industry path to the “end game” is very comple Regulatory uncertainties  Banks and other providers need to choose to p

the services (business case, risk, other prioritie

 Different characteristics for unbanked groups, 

will never fit all 

 Unbanked need to decide this is the right solut

them (education, trust, language, complexity) 

 Smart phone penetration among unbanked sti

relatively low