and they can pay with their phone while comfortably sitting in their car at the gas pump. currency is available on virtually any smartphone and soon you'll see it at thousands of other places around the country. stay tuned. soon you too will be able to shop like never before. >> this new network will benefit a wide range of consumers in three basic ways. one, delivering a better shopping and payment experience by enabling customers to interact directly with merchants through any smartphone. two, safeguarding consumers and merchants by maintaining the direct relationship that merchants have with customers. three, bringing balance to the payment's ecosystem. mcx brings together the best in class technology to create an unparalleled network in the mobile space. mcx has launched currency that

can be downloaded to any smartphone a customer may choose. we are currently in a public beta operating in columbus, ohio. expansion of the rollout will continue as 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're shopping. at a fuel station they be asked to dip their card. at a sit-down dining experience, they wait for the server before relinquishing their card to the establishment.

we have designed our technology to deliver an optimal payment experience at any merchant in the best way possible. to deliver that consumer experience, we're leveraging several types of technology solutions. we remain open to new technologies and are always looking to source the very best options for our consumers and merchants. we're working with qr codes, and geolocation providing the best user experience regardless of location. fundamentally the current payment system works well from a consumers' perspective. mcx and its merchants are focused on providing consumers new and more convenient and more rewarding and safer ways to shop. there are four important ways. wide acceptance. our owner merchants already include national leading retailers and regional leaders in large formats, specialty retail and travel categories.

developing that network will give consumers the ability to shop with frequency and to develop muscle memory using currency allowing it to replace the card swipe over time while providing additional security and convenience. at mcx we're technology agnostic. the consumer should have the convenience regardless of their mobile choices. because it is cloud based, it is easily transferable. this means a consumer can choose to access currency directly or have the ability to garner the same benefits if they choose to use the merchant app. merchants value the relationship with their customers and want to enhance those with a faster, safer, and more secure way to transact. our solution is designed to

combine all those simultaneously. because currency is tied directly, we have the ability to deliver additional benefit such as item level coupons, which eliminates paper coupons. the ability to benefit from offers and loyalty directly from their handheld device. we're testing discount programs in columbus. two of our most popular are a coupon for a free frostie and a $5 bonus extra care cash at cvs. consumers will have the freedom to pay using a variety of accounts.

mcx recently signed a partnership with jpmorgan chase will increase options available by enabling customers to use their chase cards wherever currency is accepted. at mcx we are always open to adding new forms of payment that will provide greater convenience to consumers using currency mobile payments as a platform. at mcx we're focused on leveraging innovative technology. however, many consumers remain in the dark about how to leverage the latest security technologies in their everyday lives. we believe it is incumbent on mobile payment technologies not only to use the latest security technology, but to help educate consumers on how it is working for them.

our app uses secure dynamic tokens uniquely generated for each transaction to facilitate transactions instead of constantly passing data. using a dynamic token means the consumer can be assured their personal information is never stored on the device. currency was designed to ensure consumers are in control of their own personal security. >> let me ask you to please wrap up. we have other witnesses to hear from. >> okay. thank you. i'll just finish this section. 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 consumers and merchants the opportunities to share in the mobile payment

space. thank you. >> the chair thanks the gentle lady. >> mr. chairman, thank you, member schakowsky, brooks, and other honorable members of the committee and subcommittee who are here today. i'm very pleased to be here to talk about mobile payments generally and with a microphone it will be even better and to talk about consumers in a today's marketplace. and i am especially pleased not only to be here with you, but to be here with my long time 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'm not here as a representative of the uniform law commission, although i'm working on a virtual currency project with them. i'm not here as a representative of the federal payments task force. 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's also the end of year charitable fund drive and mobile payments are very important to charities. and as john said, 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. the committee asked us to look at the four questions. the first was whether mobile payments were disrupting other forms of payments. and i personally believe the answer is not yet. and i'm not certain when that moment will come when that will happen, but i think it is a question of a level of adoption and i'm not positive given that mobile payments will continue to rely on credit, debit, and other traditional sources of the funds for clearing settlements the

degree to which mobile payments will disrupt in the way 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. from a privacy perspective, i don't like the geolocation option quite so much, but that has because i am really a privacy hawk, so i think 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 type 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. i know there have been others, but i think 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 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 a bill and the banks lived with other privacy opportunities and responsibilities that they believe are considerable. i would welcome any questions that the committee may have. thank you. >> the chair thanks the gentle lady. >> chairman burgess, ranking member schakowsky, and members of the committee, thank you for the opportunity to testify on behalf of samsung electronics america. i would like to introduce you to samsung pay. whether it is fighting fraud or

helping consumers zip through black friday checkout lines, samsung pay benefits consumers, merchants, and financial institutions. samsung pay is accepted virtually anywhere where you can swipe or tap a card. swipe up. i'll demonstrate on my phone. swipe up to launch the application. confirm your identity with a fingerprint. hover the device over the payment terminal. for merchants, samsung helps merchants provide a secure and fast payment experience. we support magnetic stripe, nfc, and the terminals. samsung pay has security features, including tokenization and fingerprint authentication that limit fraud and reduce liability. so those are samsung pay's benefits and 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. headquartered in new jersey and with facilities in dallas, palo alto, austin, and massachusetts, samsung electronics is a leader. we employ approximately 15,000 people in america and our $15 billion investment in our semiconductor plant is the largest single site of foreign direct investment in america. 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. 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 have 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. although nfc shows great promise, only a small fraction of merchants in the united states have adopted nfc at point of sale terminals. consumer acceptance of mobile payment services at nfc has remained low. samsung pay lets you pay at most any terminal where you can swipe a credit card. we're using a new technology called magnetic secure transmission.

it is 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 that consumers get from a credit card. 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. samsung pay provides merchants with tokens created by the consumers credit card that enable the merchant to process the transaction without exposing customer information to potential data thieves. samsung pay utilized biometrics as well.

additionally, our smartphones incorporate the samsung security platform keeping all payment data locked and secure. getting user privacy right is important. the transactional details are encrypted. no other mobile manufacturer reaches as diverse an audience as samsung or offers consumers such a wide array of products at different price points. we welcome your thoughts and 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 chair thanks the gentleman. the chair thanks all of our witnesses for providing testimony today and food for thought.

we'll move into now the member question part of the hearing. i'll recognize myself for five minutes for questions. ms. dekinger, obviously we've 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? >> thank you so much for your question. we're very focused at mcx on creating consumer choice and enhancing that, making it available to all consumers. we feel it is very important for consumers to have the option to use whatever device they want to. any smartphone a consumer has can leverage our technology pretty easily. >> i've got to ask the question. what about a flip phone? some of us still have them. >> we're not quite there yet. >> not quite there yet.

>> mr. ahn, you bring up some great points, and i think you've heard member pallone talk about services to the unbanked and 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 some degree bridge that gap, could you not, with the devices that you're talking about? >> that's right. we have the opportunity through our phone ecosystem. and we are a global company. we have the opportunity through application to provide payment solutions that are relevant for consumers. what we're doing in the united states with our recent launch of samsung pay is providing an opportunity for the user, then consumer to pay at any merchant location, whether it's a big box

retailer or small mom and pop shops. mcx, there are many partners within mcx. it is designed to be a large consortia of the largest merchants. however, we think that we need to go beyond just large box retailers into mom and pop stores. anywhere there's a transaction, we want to be there for the consumer. so having said that, i think it's in the early stages of this payment ecosystem. and all innovations are helpful as a rise in tide lifts all boats. we want to move the payment ecosystem forward, primarily creating additional security for the user going forward. >> mr. muller, let me just ask you, paypal, one of the originals, when i ran my first campaign, 13 or 14 years ago i had a paypal option for people who wanted to support, but

you've probably i had more experience in this space than almost anyone else, and how do you, how do you leverage the security? how do you add additional layers of security for the transactions for the consumers? >> so, it's always a matter of trying to add security with user convenience. and the user experience. and that's what mobile device offers in a somewhat unique way is the way to improve both the user experience and security, and that's a rare thing in the payments field. through the kinds of technologies we've already mentioned, like the device location or unique device identifier and do it in a way where the user controls what

information they're sharing. so that's the holy grail we're all trying to achieve. and also want to emphasize that all the same risk programs are still running in the background. so it's -- we don't assume that there's 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're still running all these other tests in the background, looking for risk variables in the transaction. so it's a matter of adding to risk-reducing programs that already exist, not substituting them purely with new types of authentication or security. >> thank you. i do just want to -- this is not a question. it's 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, we've 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'm going to recognize ms. schakowsky. >> so, ms. deckinger, we celebrated small business saturday. i went to a number of small businesses in my neighborhood. so your technology right now, really favors larger operation, right? >> at the moment, yes. we're, we are in early stages of

a pilot at the moment. so we're still developing our technology and working to build a network that consumers can use currency in places where they shop every day, yes. >> 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? [ inaudible ] >> ms. schakowsky, i think it depends a great deal on the system. mr. ahn has just said that samsung pay, which is relatively recently introduced in the united states does not -- i did it again -- 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 cope it, and you're passing the payment through, but you're not passing the consumer's information through. >> so is that -- is that a correct description? >> that is correct. the way we implement today is send the data package over that is completely encrypted and no one sees what's inside. >> okay. so is that unique to your company? >> no, it's not. >> but it's not mandated in any way, is that right? >> there's one item of tokenization by leading technology. >> i was about to say i think your clarification was extremely helpful that paypal also operates in an escrow mode, because the transaction information flows into paypal and then paypal processes the payment transaction in a way that's lots more like an escrow than many people believe. that is not true of every app

that might be available. >> that's what i wanted to know. >> 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's a branded company like paypal and samsung, whether it's 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. >> 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 you push accept. and i would challenge almost everyone whether or not they carefully scrutinize those things before pushing "i accept." and then moving on to, to use. i'm just wondering, since there are alternatives, some more secure than others, should there be some standardization? should there be some requirements to protect consumer privacy? >> well, i had mentioned earlier that i'm a privacy hawk. but i believe very firmly that everybody should have the privacy protections that congress and many states have already provided, that 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 multi-factor authentication, working with tokenization, doing as mr. muller said, continuing to run their risk platforms which are old-fashioned artificial intelligence operations in the background monitoring the payment transactions that are coming through their systems, though as long as there is a floor, then i believe people should be able to compete to offer better tokenization, more extensive or unique -- >> well, that's something we're 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've actually run out of time. so i'm going to yield back. >> would you like me to answer the question? >> yeah. >> so i think the answer is right now, among the various payment systems in the united states, there is already a broad 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. >> i'm 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'm going to -- i need to move on. >> chair thanks the gentle lady. chair recognizes ms. blackburn. >> ms. schakowsky might be moving on, but i'll just kind of put a comment to the end of her word. she, we have had a privacy and data security working group here at energy and commerce, and we all are focussed 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. okay. it is the apple pay rival and walmart backed mcx user e-mails snatched. and this was in your data test period. it was october 2014. that was a forbes article that was written about this. and mr. chairman, i'm going to

pass this down so ms. schakowsky can see it, because i know she's like me on this privacy issue, very concerned about that. i want you to provide some information about that hack and what you did in resolving it. >> thank you very much for the question. >> sure. >> a subcontractor of mcx had an incident where some e-mails were released. they were immediately released as a subcontractor. >> how long did it take to do that. >> immediate. >> we've taken extensive precautions, security's very important to us. obviously, it's very important to our users. we've taken extraordinary precautions to address any issues with that subcontractor and other subcontractors in the

future. 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 very hard to achieve -- >> 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 multi-factor authentication or tokenization. what are you moving toward? and are you pleased with those advances? and i'm coming to each one of the rest of you on this panel. so get ready. clock's ticking. 30 seconds. >> we meet regularly to discuss the latest security evaluations, we're always evaluating to see what's possible for merchants and the consumers and the app. 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've worked to make sure that we are always staying on the cutting edge. >> okay, mr. muller? >> so i think for all of us, you'll probably hear the theme that it's a constant battle and constant investment in security, because the fraudsters are out there also, continually changing their methods of attack. so we try to make that gdvestment, and it's certainly a 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.

>> okay. mr. ahn. i want to come to you, talk to us about the vast identity alliance in your protections. >> sure, so the security protocol we've put in place are quite extensive. what we think about is putting multiple walls up, so the fraudsters have to hop over many, many steps to reach the information. one of the things we have is the integrated chip level the micro processer has a way through knox to shut down in the event of a rooting event. the authentication must be done by fingerprint or pin. we have the ability to turn off payment credentials immediately and turn them back on. >> so hold on. so you've got three tiers of encryption? >> we have multiple ways. the last one is that the card works and have the ability to turn on and off tokens.

the last most important piece is we've purposely architected our solution to not store personal information and card transaction information. we only pass on a token. so for us, there's no central point to hack. it's temporary transaction history on this one device. and this one device is not a rich enough target for fraudsters. so that's how we view security. >> chair thanks the gentle lady. >> 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. on unauthorized charges on a credit card are lower than on a debit card. >> i believe -- >> mic. >> i did it again. there we go. i believe, representative pallone, that you have hit upon the single greatest challenge from the consumer perspective, and this affects banked and unbanked individuals. so those using credit cards and debit cards have access to two federal statutes that have been in place for 40 years and 47 years. 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, paypal as i remember, since i'm a paypal user does have a no-liability 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're making does not have the same level protections, because those are both either because there's 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 young banked, 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 funds transfer act. the key gap at the moment is

someone billing something to their mobile phone account. and that is the gap that exists in federal legislation, and that is a gap that also exists in the states. >> so you said with prepaid cards, and what about gift cards? >> gift cards -- >> there is some protection. >> 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. so that the, and, but payroll cards have better protections than regular gift cards do in the same environment, because of efforts to bring them under the electronic act. >> what do you suggest we do to have these protections for all

these things. >> 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 believe the cfpd does either. the states, because of the strength because of the federal communications act, i don't think states have the 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 collision, 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's an extremely interesting topic. >> all right, i have just a little bit of time. with so many third parties involved in mobile transactions, i was concerned that consumers could be given the runaround, that each would point the finger at each other. do you want to comment on that? >> consumers may go to vendors for that purpose, but i think consumers largely go to their financial service provider, whether it's samsung and paypal or their bank to get resolution of their disputes. the one gap you've identified, sir, is where they're not going to have that person to help them, not in the same fashion. >> all right. thank you, thank you, mr. chairman. >> chair recognizes the other gentleman from new jersey, mr. lance, five minutes for questions.

>> thank you, chairman burgess. ms. deckinger, it is apparent that one of the biggest hurdles to getting americans to adopt to 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? >> 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're very comfortable with their current method of payment. they're comfortable with going to a store and swiping a credit card. we believe our network includes that kind of scale and has that great reach. consumers are gassing up at fuel stations several times a week.

they're at coffee shops, 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 that kind of payment. i don't think there are any legal restrictions, but i would welcome any other input on that. >> anyone else on the panel, professor hughes? >> i would agree that there are no legal imperatives 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's -- 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 couldn't understand it, but because she wasn't a mechanical person. and she was comfortable with the options that she has. and the comfort level with the options currently available even though they're expanding is a difference between us and the 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 in the case of some, you have to have a smartphone, and a new enough smartphone to use it. you're going to see in older generations and in less affluent generations lots of smartphones, but not everyone has one. so the mechanical barrier, may be, depending on the nature of the service being offered, the mechanical barrier, what kind of device, which takes a maturation of a marketplace.

>> thank you. mr. muller, you said how many transactions from paypal a year? a billion, did you say? >> a billion in 2014. >> and there will be more you believe in this year, because in your last quarter it was 350 million or something like that. what percentage are in the united states and what percentage are in europe? and what percentage are in asia? >> so our largest markets overall in the world are, you know, 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 towards a third of all of our payments are on a

mobile device, again, usually either a phone or a tablet that's used where five years ago they would have used a laptop or desk top. >> thank you, mr. ahn, explain samsung's latest device in your testimony, what did you say that samsung is doing next? samsung card? samsung -- >> the question was with respect to our product? >> yes. >> ecosystem. what we're doing today is we have flexion devices which we call galaxy and note. we are looking at a broader ecosystem where we can put samsung pay onto them. whether they're additional mobile devices or wearables. >> a wearable would be a watch? >> a watch. >> and you could then purchase items or pay for items from that device? >> that's part of our thinking. >> has that occurred yet? or is that still in development? >> we're developing and evaluating it as we speak. >> thank you for making new jersey your headquarters here,

and i have been to your headquarters in seoul and appreciate that. >> 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. it seems like there are many entities involved in mobile payment transaction than consumers may realize. how can we ensure consumers know who's involved in their transaction apart from themselves and the service they are directly interacting with? >> that's 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, technically, because merchants use a lot of third-party payment processors. and third-party payment processors are among the least-regulated entities in the payment space today. they're not very well regulated by the states. some are regulated as money transmitters. some are not. and they're not particularly addressed by 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's 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 track 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 clearinghouse payments company on the -- which i'd 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 would suggest that it might be something that you would read on that particular narrow subject, which is quite an important one. but i -- 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. >> i think we're concerned more about breaches, you know. you're then dealing with many more entities that are holding the data, right? so -- but let me move to ask about lack of transparency and the notion of consumer consent. how can consumers consent to the relationships with entities that they're unaware of? >> well, representative clarke, that's a very complicated question. and i think as there are already lots of payment processors operating in the united states where we're not seeing a lot of transparent consent. i think 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, i think we should put the primary focus on the merchant 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. >> do you believe that greater state law to supervise them. >> 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 be unsure about who will have access to their data afterward. >> that, too, representative clark, is an excellent question. and i think there is -- 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 began -- >> but atms don't have a third

party. you can just walk into -- >> some do absolutely. >> absolutely, absolutely. >> kiosks and stores and other places -- >> rarely. >> -- have a landscape and ecosystem that is very much like mobile payments today. so the answer is -- but there you're talking about your bank and you're talking about the place where you used the machine, assuming you remember where it is, and it's usually on your receipt. so, i'm 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. >> i yield back. thank you. >> the chair recognizes the gentleman from mississippi, mr. harper, for five minutes, please. >> 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's an incredible topic. and it is affecting our lives in so many ways as we look at this. and so i'm all in. this is a great -- a great

topic. mr. mueller, 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've 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? >> so, you know, like most companies, there have been some successes, but also some -- some learning opportunities. one was, as i mentioned, the switch away from the palmpilot as the focus towards e-mail 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 that signed up using text message and just sending a text message with a certain -- 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 that the money would go to the right place and be credited correctly. so that effort -- >> does that mean it was too simple to give confidence? >> well, i think perhaps to some degree -- i don't know if too simple or simply too unclear, too the information associated with the actual transaction itself. and this was at a time before --

just before the iphone, so we're 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've done that got us to the 1 billion transaction number 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 website and their checkout pages for mobile devices. so that the experience is as good as it can be on the smaller screens. >> so, what's the next big thing to look for? where are we headed? >> well, so one thing that is

already live for us and it's an experience, again, that many other payment companies are also in their way matching or trying to is what we call the one-touch 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've 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've chosen to opt in to this feature, again, improving both the shopping experience and the merchant checkout. and then the other set that's coming i'd 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 is something all of us are working on. and that's coming. just who unlocks the right combination is yet to be seen. >> you know, our time's almost up, but i do -- 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? >> so, that's another challenge for the industry as a whole that we're eager to take on and do more. today i'd say really the primary vehicle of 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 and so -- >> i apologize, my name is well over, mr. chairman, i yield back. >> the gentleman yields back. the chair thanks the gentleman. the chair recognizes the gentleman from california for five minutes. >> 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're 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 kind of communities, how can mobile payment providers better reach minority communities and underserved or port communities and ensure that these consumers enjoy the safe and convenient commerce that everybody else expects are can experience? that -- the main thing there is certainly if there's 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 be -- participate yet at the

same time how do we make sure that those -- that we have an even system that is available to them really? professor? >> 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 individuals don't have bank accounts. underbanked individuals may just not have a bank very close by. and if we think about the use -- 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 longer have a corner branch of their -- of a bank to help them. and because, as mr. mueller 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 at least is cash. so, if you have a way tonk