As the payments landscape evolves to include more digital options such as Near Field Communication-driven contactless payments, the American Bankers Association has formed a task force to monitor and advocate for security, bank involvement and interoperability.

The group is pushing for standards that ensure a market that’s as open as possible yet maintains banks’ position as primary processors of digital and mobile payments.

Jeff Plagge, president of Northwest Financial Corp. of Arnolds Park, Iowa, is chairing the task force.

Plagge and Steve Kenneally, vice president of the association’s Center for Regulatory Compliance, discussed the new task force in an interview this week.

The task force’s members also include execs from Gulf Coast Bank and Trust Company, New Orleans; Home Savings Bank, Kent, Ohio; Goodenow Bancorp, Okoboji, Iowa; Firstrust Savings Bank, Conshohocken, Pa; First Bethany Bank & Trust, Bethany, Okla.; American National Bankshares Inc., Danvile, Va; the Montana Bankers Association; and Sterling Savings Bank, Spokane, Wash.

How was the task force put together?

Plagge: My interest in the payments system goes back ten years, when I served on the Chicago Fed Board, back when check processing centers were starting to unwind and we started seeing the movement to debit. I thought the changes were rapid back then, but that was nothing compared to what’s going on today. With the task force, we tried to find a group of bankers that had a significant interest in the payments system and that represented different bank sizes.

Is the pace of change a concern?

Plagge: You could have a full time job simply reading articles on mobile payment and mobile wallets. It’s a central part of our focus, we’re watching how mobile wallets develop from an operational standpoint.

Are there areas of interest for the task force regarding mobile wallets?

Plagge: You have a lot of players trying to figure out that market, there are big names like Apple and PayPal starting new products. There’s a big question of interoperability. At what point do all of these dots start connecting? There is also a question of security. We have an interest in these systems being built around structures that are already in the payments system [bank-led processing], rather than creating something that exists outside of the banking system. We want to make sure the new payments ecosystem is accessible, that when consumers access it they can trust that it’s a safe venue.

Kenneally: The interoperability really benefits the banks and the consumers because the consumers want to make sure that when they are making a payment, whether it’s a mobile wallet or person-to-person, they know the entity that they are paying is ‘in network.’ It’s like the old ATM networks, where your bank card might not have worked in another state.

Have you take a position on the preferred form of NFC for contactless payments?

Plagge: We don’t have a position on the technology. At the end of the day there is going to be money coming out of one account and going to another account. We want it to be a secure channel.

Is that an advocacy for bank-led processing over alternative methods from retailers or startups?

Plagge: On the banking side, there are rules about settlement and credits … keeping contactless payments in the bank space keeps the processing on bank rails, and it keeps the Fed policy behind the settlement.

Are alternative digital/mobile start-ups riskier for consumers?

Kenneally: We’re concerned that people may get too enthralled with new payments technology without having the infrastructure behind it. The new startups may have the technology, but they may not have the laws and regulations attached to it like banking transactions.

Plagge: If those entities aren’t subject to FDIC oversight, I don’t want to be a ‘chicken little’ here, but there is a possibility for some awkward and uncomfortable transactions if a non-bank takes the lead and something goes wrong with the payment.

Do nonbanks have it easier from a regulatory perspective?

Kenneally: Banks have to meet high levels of data security and privacy requirements by law. Others that try to get into the payments [processing] business, whether they are a tech giant or a social networking company, they may have a different approach to privacy than banks do.

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