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tv   Politics and Public Policy Today  CSPAN  January 4, 2016 11:20am-1:21pm EST

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we have to keep fighting, keep pushing and keep organizing in order to get those changes. we need. >> what we're involved in the world right now are protracted battles. we have been under that boot since we've been here. we came here under the boot. it's our responsibility as legislators and policy makers to continue to be that voice for our folks. it's not an old argument. it's unfortunately the same argument but we have to try to change some of our tactics. and if i can quote my good friend delegate nate oaks, when my fpeople are in trouble, so a i. we need to keep that into our mind-set, that we have asked for this responsibility to be the voice of the people. and we need to continue to do that. >> thank you. >> i want to taigke a moment an say for everybody at nbcsl i
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hope you've found this successful. we came here to hear from all of us but more importantly to be able to take back to our communities recommendations on how we improve the relationships as it relates to race in america. because this conversation is not only needs to be had here but needs to be had in our communities and our neighborhoods. we need to understand that we do represent people and this is our responsibility and part of this is about economics and if we don't change, history will repeat itself taz continas it co do. because as you talk about movements that are taking place today, they're similar to am movements that have taken place in the past. our role is to move our community forward so i hope that as we leave here that we take that in mind and, more importantly, that is nbcsl, we continue to lead on issues such as this. thank you. >> thank you so much.
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>> i have no closing remarks except to say thank you for inviting me. >> bill clinton is back on the presidential campaign today. he heads out for his solo campaign events on behalf of democratic presidential candidate hillary clinton. he has stops in new hampshire. we'll follow him in ex-ter, new hampshire, hillary clinton is on a two-day river to river tour of ohio in the meantime. >> tonight on the communicators, consumer technology association
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president gary shapiro, why the cts changed its name this past fall to consumer technology association. he's joined by tony rahm, politico's technology reporter. >> over 3600 exhibiting companies and over 2.4 million net square feet of exhibit space, that's up from 2.24 million in 2015. so it's going to be spectacular. more innovation, more excitement, more different categories than ever before. it's the future. it's a show where solving problems, real life problems, not just entertainment, education, information, it's about health care. it's about transportation. clean food, clean water, greater food production. we're solving big problems with technology. >> tonight at 8:00 eastern on the kmuj communicators on c-spa. the house commerce manufacturing and trade subcommittee is looking into the growing use of mobile payment
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technology and its security challenges. representatives from samsung and paypal were among the witnesses. this is about two hours. >> subcommittee on commerce manufacturing and trade will now come to order. the chair recognize himself for five minutes for an opening statement. and i do want to welcome everyone to our hearing this morning. examening 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 is the latest in our disruptor series covering a improving our 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 swing, this is a good time to take a look at the consumer experience with mobile payments. this morning, we will hear from
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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's no surprise they're chaging the way we shop or goods and services. you can shop on your be tablet in front of your television, compare prices on your foreign as you browse in a store and pay without pulling out your wallet. consumers have access to more information and more competitive options 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
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for -- in 2014, 22% of mobile phone owners reported making a purchase with their phone. 39% 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 website. when you want to send your friend money for the concert ticker they bought for you, all you need is their e-mail address or 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 of a mobile payment. 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
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and how they are addressing these and other concerns raised by consumers. two of the top security topics 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 username and 1234 as their password. mobile devices offer 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 websites, mobile devices have changed. they've changed how people think
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about authentication, fingerprint censors, cameras are found in an increasing number of mobile devices. instead of remembering a separate password to unlock your phone or tablet, you may be able to use the fingerprint scanner to unlock the device with 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're all familiar with the toke ens you get at the arcade. as has been the case throughout history, technology has the ability to improve our lives. noble payments are no exception to that trend. i look forward this morning to hearing from our witnesses and how they're leveraging the mix
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of technology to provide an experience for united states consumer as was we make our way through this shopping season. i'll yield back my balance of my time. >> thank you, mr. chairman for holding this hearing and the series of hearings. i just learned that 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. it that the number i put in is the number he wrote on the check. that's 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 -- how do
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to address those issues is the responsibility of our subcommittee. we want to maximize benefits and minimize risk. mobile payment rely on geolocation, purchase preference, phone numbers, e-mail addresses, those features can enhance protections against payment fraud. however, they can also put consumers at greater risk if they are unprotected or their use extends beyond managing
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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're 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 type 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 zmris italy approved and for the subcommittee responsible for convict superprotection we have the obligation to those those lo loopho loopholes. i look forward to hearing from our witnesses. getting their perspective on
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opportunities, challenges and the way forward with regard to mobile payments. and i yield back my time. >> the chair recognize the chairman of the full committee mr. upton five minutes for an opening statement. >> good morning. today we continue our disruptor series. we've previously examined the internet of things, the sharing economy and most recently drones. today we discuss the growing friend of mobile payments. no matter where folks choose to travel or shop, michigan, the nation or even across the globe, their smartphones are ever present, always present. early estimates show that for the first time ever more people shopped online than in stores over the thanksgiving highway. cyber monday estimates are still being tallied but we're seeing a fundamental shift in how people are buying the goods and services available to them throughout our economy. consumers have more choices than
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ever before about when and where to shop. these choices open up opportunities for innovations to take root and spread throughout the economy. we've seen this sort of disruption throughout the series of hearings and mobile payments are certainly no different. they are impacting how the internet of things and sharing economy develops. the disruptor 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 businesses and opportunities alike. businesses small and large can benefit from the disruptions for hardware like square and software that make payments easier for small businesses and between friends respectively. these are just two examples in an ecosystem bursting with growth as more and more americans get smartphones, tab loets and other mobile devices. new technologies in competition are responding to consumer needs. mobile payment is happening all
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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 we're pleased that today we'll learn more about the options consumers have particularly how the options can and will continue to improve security for consumers and job creators. i yield the balance of my time to marsha blackburn. >> thank you, mr. chairman. i am so appreciative that we're 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. 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, marsha, you need to pay for this.
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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 or a button or with great ease that you're going to be able to make these purchases on the go in realtime, paid in realtime and with great convenience and security. and security. and that is where much of our focus is going to be, whether it's the multifactor a authentication or tokenization or what i want to hear from you, what's next? where do you think we are going with this? because convenience, yes. people want it. security, they're going to demand it. because they want to be able to
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protect their virtual presence protect their presence in the brick and mortar relationship with those that they're 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's next. yield back. >> chair recognizes the gentleman from new jersey ranking member of the full committee five minutes for an onning statement. >> 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 i tied to our smartphones, it comes at smo no spriemz we can strfr funds directly to our peers, make purchases by simply tapping our phones to a terminal at the point of sale.
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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 in an outing a mobile peer to peer payment could be the difference between being squared away and an iou. the ability to store credit cards in your phone may also offer consumers peace of mind that in the event of a lost or stolen phone their information is safe behind a pass code. 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. and 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 data by
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the use of smartphones including phone numbers, geolocation, e-mail addresses and purchase histories. consumers don't know who has access to their information and with whom it's shared. it may used for merchants sending unwanted advertising through mobile devices. that personal information could also be sold so consumers' location or private matters shared with the highest bidd er. it's also important that consumers are ensured secure transactions through a mobile payment system. as with any mobile device or application, digitally information is hackable. with the major data breaches of the last few years still fresh in our minds, mobile payment users will understandably be hesitant of using an app if there's no protections from hackers. it's been made clear through the series of hearings on disruptors innovation and consumer
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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 nor consumers. i look forward to hearing from today's witnesses on to topic. thank you, mr. chairman. i yield back. >> this concludes member opening statements. the chair would remind members that pursuant to committee rules all member opening statements will be made part of the record. 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 great group includes mr. john muller, senior vice president for global payments policy at paypal, jessica decken jer, chief marketing officer at the merchant consumer exchange, sara jane hughes university scholar at the indiana university school of law.
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and mr. sang hon chief officer at u.s. samsung pay. we appreciate you all being with us this morning. we'll begin the panel with you, mr. muller, and each of you will be recognized for five minutes for a summary of your opening statement. mr. muller you're recognized. >> thank you, mr. chairman and ranking member schakowsky and our members of the committee. thank you for the opportunity to testify on behalf of paypal. my name is john muller, and vice president of payments policy for paypal. paypal has been involved in mobile payments now for 16 years and started with the cutting edge payments mobile device of its time, which was the palm pilot you may remember. the personal digital assistant without phone capability.
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but a very portable device and paypal was actually built to beam payments from one palm pilot to another. at that point, we quickly realizeed that more people had e-mail and internet access than owned a palm pilot, but we've 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 processioned 345 million mobile payments. i have some more information on paypal in a 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
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commerce and it follows where people spend their time. very few people, maybe the people on this panel accepted, make a payment just for fun or just to try it out. there's always a purpose behind it. and for most of us, the purpose is commerce or the purpose might be to tak pay back a friend and increasingly we're doing our shopping on mobile devices and we have our mobile devices with us when we're out with a friend or contacting a friend. so it's 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's really new about the new generation of mobile payments is the opportunity for all of us in the payments industry to take
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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 thumb print being the first live version but certainly more to come in that are 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 and giving me choice of funding methods. so if i have a card, the 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
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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 the new kind of device but really very similar to the kind of e-commerce 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 of the opportunity to touch not just e-commerce but
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physical commerce is using the phone as a substitute for the plastic card and paying at a physical point of sale. and the third type, certainly not to diminish it in any way, equally important, is using the mobile device as a way of enabling businesses, mostly small businesses, to accept cards and other payment methods electronically, in a mobile business environment whether it's a food truck or a farmer's market or any of the other many opportunities that small businesses use for devices, attaching a small reader to their device, 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
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it's 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
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visa and mastercard and paypal all offer to pbuyers. just wanted to make those broader points. with that, i'll conclude my remarks. thank you and look forward to questions. >> thank you for the opportunity to testify on behalf of merchant customer exchange. 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 solutions are rapidly moving to the forefront of both in the united states and globally. who is mc mcs? mcx's members include retail leaders in the big box, convenience, fuel, grocery, quick service full dining and
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specialty retail -- [ indiscernable ] >> we have great news. currency is now live in columbus, ohio. the people of columbus are experiencing a powerful new way to shop. not only can they pay, they can redeem coupons and gain loyalty points all in one swift move. currency was made to be used at the places that people of columbus go every day, like their favorite restaurants.
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even at the drive-through. >> that will be $8.32. >> i'll be paying with currency today. >> okay, great. have a great day. >> they can also clip offers and scan at the checkout at retailers and the grocery store. and they're good to go. discounts and loyalty are applied instantly. 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
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a wide range of consumers in three basic ways, one, delivering a better shopping and payment experience by enabling customers to interact directly with mer comments by any smartphone to safe guard consumers and and merchants by maintaining the direct relationship merchants have with customers and protecting customer data. three, balancing the ecosystem. together mcx's system accesses $1.2 million in payments annually to allow consumers to use their smartphones wherever they may shop. mcx brings together the best partners to create the mobile space. to achieve this goal, mcx has an application called currency that can be downloaded to any smartphone. we have conducted private rollouts with their employees. as of september 15, 2015, we are in a current operating base in ohio. we want to gather information from consumers and merchants to
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continue and refine the product to meet the needs of consumers and merchants. this will occur through the balance of 2015 with national public availability currently anticipated in 2016. today consumers experience payments that can differ drastically depending on where they are shopping. at a fuel station they may be asked to dip their card or type the zip code to begin fueling. consumers need to wait for the server before relinquishing their card to the establishment. other merchants have experience where the consumers swipe their cards at the checkout and we have a platform to support the best technologies to serve their customers in the best way possible. to deliver that best per chant experience, we are -- best consumer experience at merchants, we have several technology solutions and remain open to new technologies and looking to outsource the best for consumers and merchants. at present we are working with
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several innovative technologies including qr codes, energy beacons and go location providing the best experience regardless of location. fundamentally, this works well from the consumer perspective. swiping the credit card and debit card is easy to do and familiar. the merchants are focused on offering more rewarding and safer ways to shop. there are four important ways, wide acceptance. our merchants include national leading retailers and regional leaders in large pharmacy, fuel, drug, grocery, quick, and full-service and travel categories. these are places consumers shop every day. developing the network will give them muscle memory using currency. allowing it to replace the card swipe over time while providing additional security and convenience. at mcx with technology agnostic,
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this is available regarding hardware choices and because currency is cloud-based, it is easily transferable should a consumer change their mobile solution. we have also partnered with merchants to provide currency networks within the proprietary apps. you can access currency directly or have the ability to garner the benefits to use the merchant app they use every day. merchants value their relationships with customers and want to enhance the relationships adding value to motivate consumers to shop in store with a faster, safer and more secure way to transact. currency delivers by including consumer locality accounts and powering consumers to a ply offers, coupons and promotions when they play in a single transaction. we want to provide those instantaneously together in one qr code reed read so people no longer have to use their key chain to get the discounts. we have the ability to deliver
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benefits such as item level coupons to alleviate the need to clip or carry paper coupons or discount offers in the effort to provide flexibility of choice. currently we are testing several discount programs in columbus. two of them are a coupon for a free frosty, an ice cream cone, and with every purchase at wendy's and a $5 extra care box using currency at cvs. what we are seeing is to the average consumer these are tangible motivate or toivatormo. mcx recently signed a partnership with jpmorgan chase to increase the currency wallet to allow chase customers the to use their cards wherever currency is accepted. the general purpose and debit cards will be available in the future. at mcx we are always open to
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adding forms of payments to allow consumers to allow benefits and incentives to use currency mobile payments platforms. at mcx we are focused on innovative technology. consumers are inundated with (zt data breaches and identity theft. they have become more aware of the payment in technology. however many consumers remain in the dark about how to deal with this in their every day lives. it is incumbent in mobile technologies like ours to use the latest security but to educate consumers on how it is working for them. we are leveraging cloud technology to avoid storage of sensitive information on the phone or transfer the pos or the technique tokens uniquely identified to each transaction instead of passing data between the merchant and financial institution. using a dynamic token means the consumer can be assured their payment information is never
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stored on the device, is never stored on the merchant pos, and even if the dynamic token is stolen it is worthless because it cannot be used again. this was designed to insure personal security and provide visual evidence to demonstrate the security measures are working for them. >> let me ask you to please wrap up. we have other witnesses to hear from. >> okay, thank you. i'll just finish this section and then am finished. this includes registration questions, a four-digit pin and consumers can disable their phone quickly. we want to reiterate our appreciation for your mobile technology and providing customers the opportunity to share the mobile payment space. we truly believe this provides a better opportunity for merchants to experience and improve the experience overall. >> chairman, recognize the next witness for five minutes. >> honorable members of the
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subcommittee and chi wommittee here today. we are pleased to be here. and with a microphone it will be 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 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 am also not here as a representative of the uniform law commission although i'm currently working on a virtual currency project with them. and i'm not here as a rerptive of the federal reserve system's faster payment task force even though i'm also working with them on that. those are the formal usual
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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, as farmer's 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's 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 segregated, even stationary ecommerce 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
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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 that it is a question of a level of adoption. and i'm not positive give mobile payments will 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 that we typically use the term. i would prefer to say that mobile payments can augment. the second question that 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 multi-factor authorization, which we do not yet have with plastic cards in this country but in other countries we do. i like the tokenization options
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and like the geo location from the security per speck still. from the privacy perspective, i don't like the geo option quite so much but that is because i am really a privacy hawk. and so i think that that is a significanti issue. the hurdles that are existing to widespread consumer adoption of mobile payments include something that mcx is going to solve by allowing transactions -- type -- utilities. but the other hurdle requires significant consumer education expenses on the parts of the companies that are engaged in this. and i don't know whether you notice, but yesterday i saw an ad, i thought, for samsung on this score, and i no e that there have been others, but
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there's 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 super vision of payment processors who are 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 compareson the privacy was put into place in the bill and the banks live with other privacy opportunities. and responsibilities that are, that they believe are considerable, i would welcome
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any questions that the committee may have. thank you. >> chair, thank you. the next gentlemen is recognized for five minutes. >> the ranking members 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 that combines security, simplicity and widespread acceptance like no other mobile pay solution. whether fighting fraud or helping consumers zip through black friday checkout lines. samsung pays retail merchants and financial institutions. for consumers, samsung pay is accepted virtually anywhere you can swipe or tap a card. it's secure, easy to use and simple. 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 and pay. it's that simple.
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and has the widest acceptance of any mobile payment service. for merchants, samsung pay helps merchants provide a fast and innovative payment experience. samsung pay supports all payment types including magnetic type, nfc and the terminals. for financial institution, samsung pay has security features including tokenization that limits fraud and liability. 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 payment 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 ifamd how employees are contributing to samsung pay. with facilities in palo alto,
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austin, south carolina, new york and massachusetts, samsung electronics america is a recognized innovation leader in smartphones, consumer electronics, i.t. and home appliances. we employ approximately 15,000 people in america and are $15 billion investment in the 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 examined the mobile payments and found the transition from plastic cards to technology if it is secure, two, simple to use and widely accepted and 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,
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near field communications. although nfc shows great promise, a small fraction of merchants have adopted nfc at the terminals. without the structure in place to accept the transactions, nfc mobile payment services has remained low. enter samsung pay. unlike other mobile wallets on the market, samsung lets you pay at any terminal where you can swipe an credit card. we are using magnetic swipe technology, mst. specifically, mst em latulates swipe technologist that you normally get from a debit or credit card. by including the mst technology in our phones, samsung pay enables customers to make secure
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payments anywhere regardless of the point of sale equipment. because samsung pays wide merchant acceptance, we can make a meaningful contribution to security by enabling the largest token of payments. with tokenization, samsung pay never provides an account number to merchants but with tokens created by the credit card company that enable the merchant to process the credit card without exposing sensitive customer information to potential data thieves. samsung pay utilized biometrics as well to allow users to apply fingerprint to the built-in sensor to authenticate the transaction. samsung's security platform keeps all data information locked and secure. finally, user proxy right is critical. for samsung pay we do not and cannot monitor user purchases. the details are encrypted and can only be decrypted on a consumer device.
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samsung wants all users to make secure payments. no other manufacturer reaches as d diverse as samsung. accordingly, we are closely examining how to include samsung pay in a greater range of devices. as we do so, welcome your thoughts from your constituents. thank you for allowing samsung to share our information on mobile payments. >> chair, thanks to the gentlemen. food for thought. now we'll move to the member question part of the hearing. i'll recognize myself for five minutes for questions. let me just ask you, obviously, we have heard about things rather device specific, but you talk about being agnostic as to type of device. so how does that inner play into the consumer experience, having a device, any device, which is
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then able to use your product? >> thank you so much for your question. we are very focused at mcx at consumer choice and enhancing it to make it available to all consumers. we feel it is very important to have consumers to have the option to use whatever device they would like to. therefore we designed our technology to work on all devices, all smartphones. virtually any smartphone a consumer has can leverage the technology pretty easily. >> so i have to ask the question, what about a flip phone? some of us still have them. >> we're not quite there yet. >> you bring up some great points. and i think you heard rank member palone 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, to some degree, can bridge that gap, could you
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not with the devices you're talking about? >> that's right. we have the opportunity through our phone ecosystem. remember, we have over 700 million devices in market around the world and we are a global company. we have the opportunity throughout 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, the consumer to pay at any merchant location, whether it's a big box retailer, like many of the mcx merchants or small mom and pop shops. mcx, we have many partners that we are very close with and in discussions as partners, mcx was designeded eed to work with th largest merchants and are important from the consumer point of view, but we need to go beyond the large box and retailers into mom and pop stores anywhere there's a transaction, we want to be there for the consumer. so that's an opportunity. having said that, i think it's
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in early stages of the payment ecosystem and all innovations are helpful as a rise in tide lifts all boats, we want to move the payment system forward creating additional security for the user moving forward. >> veried good. mr. muller, let me just ask you, paypal, one of the originales. in fact, when i ran my first campaign 13 to 14 years ago i had a paypal option that -- as far as for people who wanted to support. but -- you've probably had more experience in this space than almost anyone else. and how do you -- how do you leverage the security? how do you add layers of security to or 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
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experience. and that's what the mobile device offers in a somewhat unique way, a way to improve both the user experience and security. and that's a rare thing in the payments field. through the kind 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
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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. >> well, thank you. i do want to -- it's 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 engrained, i would just ask you to be thinking about -- i always have 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
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technology. with that, i want to recognize ms. jacowsky for five minutes. >> so ms. stechinger, we recognized small business saturday. i went to a number of small businesses and took selfies in my neighborhood. so your technology right now really favors larger operations, right? >> at the moment, yes. 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. >> okay. i want to ask only questions about consumer privacy. professor, 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?
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>> so, thank you. i think it depends a great deal on the system. mr. ohn just said samsung pay which is relatively recently introduced in the united states does not have -- 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 keep it and you're passing the payment through but you're not passing the consumers information through. >> is that a correct observation? >> that is correct. today we send a package over and it is encrypted and nobody sees what is inside. >> so is that unique to your
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company or -- >> no, it's not. >> but it is not mandated in any way right now, right? >> this is one implementation of tokenization in the market. >> okay. i was going to say but 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 that 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 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 tokenizaiton is employed is also very random at this
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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. >> my experience with these kinds of things is that they ask you to accept the deal. and that is proceeded by a lot of stuff on a very small device that you have to figure out and legalese whether or not you push accept. and i would challenge almost anyone whether or not they really carefully scrutinize those things before pushing "i accept" and moving on 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
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privacy? >> well, i mentioned earlier 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. thankfully congress has provided. i believe 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 suggested, continuing to run risk platforms which are old fashioned artificial intelligence operations in the background of their monitoring the payments transactions that are coming through their systems, those are -- as long as there is a floor, then i believe people should be able to compete
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to offer better tokenization, more extensive or more unique -- >> that's something we 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, sure. >> 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 have not -- were not successful in the past. and whether they can be successful in the future remains to be seen. >> okay, can i just say, i'm not
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talking about necessarily harmonizing the method or the technology, but i am talking about setting a level risk that is acceptable in the marketplace. >> chair thanks you. we recognize ms. blackburn for five minutes. >> i'll put a comment to her end word. 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. and that is in the marketplace. 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
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pree p preemption. we hope you appreciate these questions, too. ms. dechinger, 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 hacked user e-mails snatched. and this is in your beta test period. it was october 2014, it was a "forbes" article written about this. mr. chairman, i'm going to pass this down because 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. >> yes, thank you so much for the question. >> sure. >> so our subcontractor of mcx, not mcx itself, had an incident
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where some e-mails were released. that subcontractor was immediately terminated as a partner -- >> how long did it take to isolate the hack? >> immediate. >> immediately. okay. >> 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's very important to our users, we have taken extraordinary precautions to address any issues we found with the subcontractor withtractors to p in the future. there are always clever and creative criminals out there to seek to look for data and we know security is perfect, but we are working very hard to achieve that. >> let me pick up on the evolution and this process. talk to me about what precautions you are taking around data security when it
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comes to the multi-factor authentication or tokenization. what are you moving forward 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. okay. >> so we have -- >> the clock is ticking, 30 seconds. >> we have a cross function security council internally within mcx and work togetherly and meet regularly to discuss the latest security innovations. we are always evaluating what is possible to make things more secure for consumers, merchants and the app. we are always, always implementing the state of the art technology that we can and whatever is available for us to implement and 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 staying on the cutting edge. >> okay. mr. muller. >> so i think for all of us, you'll probably hear the theme
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that it's 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 investment and it's 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. >> okay. mr. ohn, when i come to you, talk about the fast identity on alliance in your protections. >> sure. so the security protocols we put in place are quite extensive. what we think is multiple walls up such as the fraudsters have to hop over many steps to reach the information. one of the things we do is the integrated chip level, the
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microprocessors alone has a way for us to shut down in the event of a rooting event. the application must be awe thent ca authenticated by fingerprint. and when the card networks -- >> so old hold on, you have three tiers of protection -- >> we have multiple ways. and the card networks and credit card companies we work with themselves have the ability to remotely turn on and off tokens. so whatever happens -- and the last purpose is that we have decided not to store information and credit card transaction information. we only pass along a token. so for us, there's no central point to hack. only information is available temporarily is transaction history for the last ten transactions on your device. and this device is not a rich enough device for fraudsters.
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that's how we view security. >> thank you. yield back. >> chair recognizes the gentlemen from new jersey. mr. palone has five minutes for questions. >> thank you, mr. chairman. i wanted to ask professor hughes the consumer ability to dispute unauthorized charges on the mobile payment. for example, a consumers liability for unauthorized charges on a credit card after a certain date is lower than on a debit card. so could you -- tell me what protections are available to consumers who don't have access to a credit or debit card and choose to link a mobile payment to their mobile phone bill? >> i believe -- i did it again. there we go, i believe representative palone you have hit upon the greatest challenge from the consumer perspective. and this particularly happens to
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unbanked individuals. so the persons using credit cards and debit cards have access to two federal statutes that have been placed in one case for more than 40 years and the other case for more than 37-plus years. the fair credit billing act and the electronic transfer act, if you are correct that their standards are slightly different. you have to report faster on eft transaction than on a credit card transaction. and your liability can be different although visa and mastercard have a no liability policy. paypal 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
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have the same level of 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 unbanked, certainly they won't have debit cards, although they 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. >> so you said that with prepaid cards, and what about gift
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cards? there is some protection. >> that's correct. not all the electronic transfer fund 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 -- 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. >> but what do you suggest we do legislatively to have the strongest protections for all the different things? particularly the ones that have less protection based on what you said? >> 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 believe the cfp does either. the states, because of the
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strength of the federal communications act, i don't think the states have authority to do all 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's an extremely interesting topic. >> 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 run-around with each pointing the finger at the other. do you just want to comment on that? we only have a little bit of time. >> i think that the part -- the consumers may go to vendors for
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that purpose, but i think consumers largely go to their financial service providers, whether it's samsung and paypal or their bank for it to get resolution of disputes. the one gap you've identified, sir, is the one where they're not going to have that person to help them. not in the same fashion. >> thank you, mr. chairman. >> the chairman yields back. the gentlemen recognized the other gentlemen from new jersey, the vice chair of the subcommittee, mr. lance. five minutes for questions. >> thank you, chairman burgess. ms. dechinger, 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 wi accepted that consumers find it to be beneficial? and from your perspective, are their legal impediments in order
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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 are very comfortable with the current forms of payment and comfortable going to the card to swipe a card and it's not difficult for them. so getting them to change that behavior requires having a presence at places they shop every day 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. they are at coffee shops and at the big retailers doing grocery shopping. having that scale will drive that adoption and regular users won't create that muscle memory for consumers to get used to a new form of payment. i don't think currently feel there are legal restrictions keeping us from getting that kind of scale, but i would welcome other input on that. >> yes, nip elanyone else on th panel? >> i would agree that there are
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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 -- millenials are much more likely to use mobile payments than other late people. my mother who was clever never used the atm. not because she didn't feel like it but because she was not a particularly mechanical person. and she was comfortable with the option she has. and the comfortable level with options 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 for the penetrations of the samsung and paypal style opportunities that are not as great.
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and where in the case of some you have to have a smartphone and a new enough smartphone to use it. you'll 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 on 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. >> thank you. mr. muller, you said how many transactions from paypal a year, a billion did you say? >> a billion in 2014, that's right. >> and you believe more this year because the last quarter was 350 million or something like that. >> that's right. >> what percentage are in the united states and what percentage are in europe and what percentage are in asia? >> so our largest markets
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overall in the world are the english-speaking countries, the u.s., u.k., canada, australia. also germany. and in all of them we see pretty comparable as far as payment goes, total payment. so getting towards a third of all of our payments, are on the phone device. again, usually a phone or tablet is used five years ago where we would use a laptop or desktop. >> thank you. >> thank you. explain samsung'syl in your testimony, what did you say? that samsung is doing next -- samsung card, samsung -- >> the question is with respect to our product? >> yes. >> our ecosystem, what we are
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doing today is we have devices called galaxy and note. we are looking at future devices and a broader ecosystem to put samsung pay onto them. whether they are additional mobile devices or wearables. we are looking at a broad ecosystem. >> where it would be -- >> a watch. >> and then you could purchase items or pay for items from that device? >> that's part of our thinking. >> has that occurred yet or still in development. >> we are developing as we speak. >> thank you. and thank you for making new jersey your headquarters in this part of the world. i have been to your world headquarters in seoul and was deeply impressed. >> thank you, mr. chairman. >> i would like to recognize the woman from new york. >> transparency, unlike simple cash transactions using a mobile
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payment system can bring in unseen third parties. professor hughes, there are often many ent 'tities involved more so than consumers realize. how can we ensure the consumers know who is involved in the multiple payment transaction apart from themselves and the service they are directly interacting with. >> 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 whether 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 third-party payment processors. and third party payment processors are among the least regulated entities in the payment space today. they are not very well regulated
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by the state. 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 is worth. so i think it is more important to ask and each of these groups and others do, for people to engage in robust super vision of the choice of providers that they use along a track thalg may be involved and to supervise them appropriately for risk management. the members of this panel may not be excited but you may care to read a study by "the clearinghouse payment company."
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which i can provide to your staff if you tell me 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 expect it would be something you read together on that particular subject. i urge you not to be making it too complicates because people choose providers based on their history with them. and it would be difficult to create new disclosures if you had to dismiss a provider and -- >> i think we are concerned more on breaches. you know, you are then dealing with many more entities that are holding the data up. so let me move to talk about lack of transparency and consumer consent, the notion of consumer consent. how can consumers consent to
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entities with those they are unaware of? >> well, representative clark, that's a very complicated question. and i think that as there are already lots of payment operators in the united states that are not of 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 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 widely and to ask them to perform the functions that are currently available in state law, to supervise them. >> do you believe better consumer transparency could help reduce the global payments.
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because certainly those unwilling to use the mobile payments are worried about accessing their data afterward. >> that, too, is an excellent question. and i think there is -- the more consumers understand how mobile payments work, just like atms four years ago there was a period of adoption and it made a difference when consumers -- >> but atms don't have a third party. you can just walk into -- >> some do, actually. >> absolutely, right. >> kiosks in stores and other places have a landscaped ecosystem very much like mobile payments today. so the answer is -- but there you are talking about your bank and you're talking about the place where you used the machine, assuming you remember where it is, and it isreceipt.
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i just think they need more education. >> i yield back, thank you. >> thank you to the chair recognize i recognizing joan from mississippi. mr. harper, you have five minutes. >> thank you. i never envisioned the title of mobile payments would be exciting. 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 topic. mr. muller, in your testimony you mentioned that paypal has been involved in mobile payment innovation since the palm pilot devices. what had been turning points in the development you have seen from paypal's perspective and what are the next big applications to be on the
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lookout for? >> so, like most companies, there have been some successes but also some learning opportuniti opportunities. one was as i mentioned the switch away from the palm pilot as the focus to e-mail and internet connection, a second generation really starting in 2006, we launched a mobile payment feature available to users to make payments mostly intended for person to person, but also a few businesses that signed up using text message and sending a text message with the certain 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
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security and many consumers feeling a little 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 it 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 little 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 whole experience, to some degree, was not as comforting as is available today with smartphones and larger screens. so i think we have learned that
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lesson and a big part of what we have done that got us to the 1 billion transaction number. i mentioned that it is not just building mobile apps and experience on the consumer side, but also helping our merchants who are by and large most medium and large businesses to have check out pages on their mobile devices so it can be on a smaller screen. >> what's the next big thing to look at? where are we headed? >> well, 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
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at a different per chant 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 opt into the feature to improve both the shopping experience and the merchant checkout. and then the other set that's coming out is at the point of sale where to date 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's coming, just who unlocks the right combination is yet to be seen. >> you know, our time is almost up, but i do want -- one phrase of interest in your testimony, you note that 17 of the 100 most unbanked places are in mississippi. how do you envision mobile
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payments increasing consumer options in those communities? >> so that's another channel for the industry as a whole that we're eager to take on and do more. today, 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. there are, starting with the baseline, that many of the financially underserved today do have smartphones. and so -- >> i apologize, my time is well over. mr. chairman, i yield back. thank you. >> the gentlemen yields back to the chair. we recognize the man from california, mr. cardess. >> thank you, mr. chairman.
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thank you to the witnesses here telling us what has, what is and what may be coming in the future. but i think the main concern of this chi is the safety and security of americans and people in our country, whether they are visiting or what have you, making sure 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 are subject to more problems because they don't have the best systems available to them. that being the case, when it
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comes to these kinds of communities, how can mobile payment providers better reach minority communities and underserved report communities and ensure that the communities also enjoy the safe and secur y securities that they should. obviously there's a lot of wealth and activity and probably a larger contributor to the billion transaction mark. you have other communities that want to be participating, yet at the same time how do we make sure that those -- are working? professor? >> well, i think this is a true challenge. and i think that mobile payments are an enormous opportunity to help unbanked and underbanked individuals.
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unbanked individuals don't have bank accounts. underbanked individuals may not have a bank close by. and if we think about the use of -- 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
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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 of this k opportunities for unbanks and underbanked individuals or people 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 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 as 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
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helping a lot more americans have a lot better access to payment options than they have had in the past. >> my last question, time is limited. interested that "60 minutes" talked about this payment system in kenya that you touched on, mr. muller, texting, doesn't have tock a smartphone, et cetera. the thing that concerns me about that isn't that it's kind of cool, it's that i would imagine that the safety of those individuals in these transactions are a lot more vulnerable than perhaps americans understand we are not as vulnerable as the systems and the advances we have. i would like to know as quickly as possible, 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
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helpful to the industry or is that something that you can do without? >> um, so i would say certainly it's 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 kind of transactions as really the same as cash, no purchase protection, 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 master card and paypal zero liability all come together to lead to the broader mobile adoption for all of us. >> thank you. i yield back.
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>> gentleman yields back. chair recognizes the gentlemen from keb ken, mr. gut rick, five minutes for questions, please. >> it was neat having this meeting yesterday. i was flying back yesterday, reading an biography of andrew jackson, one of his biggest concerns was how did he move concurrent cash, how did he pay people, 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. i was watching a football game or so this weekend and samsung had their advertisements, must have bought a lot of time, i remember seek the app we were talking about here today and i grew up in a rural grocery store, i always view things through rural grocery. so it appeared that anywhere that you can do a credit card, your phone would work, if you can pay at a pump, then you can scan or whatever the technology
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is, the term that the phone works in all applications like that. if any merchant takes a credit card, you have the ability to use your applicationsome that -- >> congressman, thank you for the question. when we say virtually anywhere, what we are talking about is a very, very high percentage of location and terminals that accept any credit card or debit card. however, we say virtually because we are not fully 100% there. there are instances such as dip readers, gas stations, atms and a small number of -- a small percentage of merchants where the technology software needs to be upgraded for us to get to everywhere. so we are not quite there yet but substantially ahead of our competition. >> my first question was your levels of mixes of security and how it protects consumers. you answered that with ms. blackburn, i think. so, does it prevent the consumer from being -- from doing it to themselves, i guess we say? does your -- things the consumer needs to do once they use your phone, your phone's -- can the
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consumer -- like if the old days you could swipe a credit card and didn't throw the receipt away and somebody took it out of your gar bash, you didn't tear it up, something like that the consumer can do or you protected them from all? >> the consumer is essentially protected behind a level of password protection and fingerprint aught then the cation that is required to ento 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. to that extent it is secure. in terms of user ability, i think all mobile payments have usability issues people are for the most part, their muscle memory today is credit card and debit swipes. it is going to take the edo system to work together to help educate consumers about the advantages of having more secure 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 a more tap-centric payment
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country. in the u.s., we are further behind. however, you know, 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 service are quickly adopted, if they are helpful and make an impact. so we are hopeful that there's enough security, utility and a better experience to compel consumers to move forwards a more technology-centric way of paying. >> thank you. and mr. mueller, i understand that paypal utilizes the cloud for storage of consumers' payment information. why did you choose to utilize the cloud instead of storing payment information on the phone or the app? >> is it more secure? >> it is partly out of necessity, 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 the mobile
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device do. with you also, with dough think there's some advantage of storing the information in the cloud. and not -- certainly not storing any of the information on the device. i mean, that's clear and that's undesirable, but also, we don't have the same access to the device as the handset manufacturer might. >> being a paypal device, you are not device specific? >> yes. >> what innovations have you seen the last year or two would make online payment data less useful for criminals or more dynamic? >> well, so, certainly, tokenization continues to develop. it's 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.
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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's probably major recent development. there are ones you read about all the time coming out, an exciting field with certainly dynamic codes, three-digit or four-digit codes on the back of your card you're used to entering. now, companies are coming up with a way to change it for every transaction. new developments coming out and more to come. >> thank you. i only have 15 second, not going
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to ask another question i yield back, mr. chairman. >> thank you. mr. kingzinger. >> 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 for -- who are 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, subject to some suspicion before adoption and many consumers want to know if their personal information, including financial and personal health inform also 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. consume verse a right to be concerned about new technology but i'm 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
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in pop later. over the course of paypal's involvement with mobile payments, what's been the largest keys to consumer adoption and what have been your biggest challenges? >> so certainly one of the keys is the one you mentioned, which we certainly can't take credit for, the proliferation of the smartphone and the affordable smartphone through the work of the handset manufacturers and the mobile carriers. and that's probably -- that's the baseline for all adoption that we have been talking about. is and then really there is just the passage of time, as we have seen with other payments, 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's always early
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adopters and that's 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. so, and then ultimately, another important factor has been the merchant adoption and getting the merchants to realize this is something that's good for them as well. it create 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 -- try their app on the mobile phone. that can be the deciding factor for many consumers. >> you also, you know, you obviously described 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
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about it, but -- >> so the first, the basic component in what we were referring to as that early form of tokenization is just not -- not creating a process where the merchant receives the card number in the first place. with pal pay, they receive news of the payment in the form of either an e-mail, 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's a similar concept to what tokenization is now, achieving more broadly. that makes it incumbent on us. we are receiving the account information to protect that account information. we had the good fortune, one of
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our founders, was a -- and still is a computer security expert. and designed the system in a solid watch 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. ahn, i hope i said that correct, some of the security concerns i have heard raised with the nfc-based mobile payments have been eavesdropping, relay attacks, device theft and interception attacks. you discuss these are real concerns or misconceptions and perhaps how the samsung pay approach addresses some of these? >> some of the concerns you mention ready real, some are misconceptions. the real concerns are related to the device theft and loss. they relate to relay -- replay attacks. there are a number and a host of ways that fraudsters can steal information.
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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, master cards of the worlds, that works and make sure we have as much fortification as possible. with respect to samsung patience we have looked at every possible angle of security and it starts again, as i mentioned before, the baseline level, moves all the way up. we are very, very concerned about security. as a malt other 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 much that relationship in trust and brand is sacrosanct to us, women not jeopardize it. we think about what we put into market, we will index heavily toward security. and yet, viable consumer solution, we have to have it usable and simple. and so that's our challenge and our burden to bear and so we take that very seriously and we would be happy to share
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additional information in more detail. >> thank you, mr. chairman, thanks for your lean yen circumstance i yield back. >> thank you very much. congresswoman brooks. >> thank you, mr. chairman. this past august, i hadded opportunity to visit tanzania, africa, where i saw the majority of the population utilizing mobile payments. and paying for everything from cabs to our -- to a dinner tab to the hotel stays and so the mobile payment technology i think is incredibly advanced in africa. and we know that 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 over -- worldwide, approximately $2.5 billion people don't have formal accounts the financial institutions, as professor hughes touched on, allowing these communities to provide for the unbank and the underbanked
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individuals and businesses to conduct business. and so, i'm 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'm curious, particularly for anyone with any -- with 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'm talking about visiting with people in huts and -- that didn't even have significant access to electricity at times. and so, a lot of them were charging their phones with solar-powered device and so
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forth. how is it that africa has advanced so much fafrser than we have? >> congresswoman, one thing i would add, the examples in africa highlight that necessary sit the mother of invention. in africa, the financial institution and the infrastructure for typical banking is 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 solution 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 the congressman asked earlier with respect to how we serve our underbanked population and provide access to as many people as possible for these payment solutions. for us, our view is that mobile
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changes everything. mobile does not tie you down to location or place. as ms. hughes was saying, you can your own time, our own choosing, location, conduct transactions and service 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 -- mobile is coming into the picture, we believe that our job now is to then open up access to the service 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 continually 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 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
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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 be -- 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 tender type to be usable on our device. so, that's how we think about this. >> thank you. and professor hughes, i'm 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, you know, starting businesses? or do you think this will be beneficial to them? >> [ inaudible ] >> mic. >> oh, i did it, it just didn't happen. thank you. i think this is a been to small business. i think as i mentioned earlier,
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it's a boone 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. i think we should be optimistic about the future of mobile payments and their ability to serve unbanked, underbanked and small business. >> thank you. thanks for your testimony. i yield back. >> thank you. mr. olsen? >> i thank the chair. and welcome to our witnesses. i have the challenge for you, mr. ahn, mr. muller. in preparing my questions for this morning, this testimony, i relied on advice from people
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here in d.c., lots of folks back home and two of my own personal experts, my two teenagers. 18-year-old daughter and my 15-year-old son. they are all about mobile. that's all they know. and the 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, their friend, hey, samsung's got this great vision. what can i say my kids? how do you explain it in english? >> so, apparently, the previous testimony was -- >> that was good, but it's good for d.c. i want my kids to understand this, because they are the future. >> i think for kids, for the -- so the young population is important demographic to follow, what they do and what their habits are leading indicators of what new consumer trends will
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be. for them, what's important is the ability, i think, to focus their life around service and goods that revolve around the mobile device. our view is that we want a future where consumers have the ability to pay in a store, offline, inside an application, in app, let's say an uber, or in a mobile web context. anywhere you are in any space that you are, we want you to be able to pay with the secure credentials that you've loaded. and so we have that opportunity as we build out our product road map, what a samsung phone allows you to do is 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, 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 allows you -- allows us to open the door for new innovations that will have a direct impact for them. >> is there any pii left after transaction apii, personal
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identifying information after a transaction with your mobile system? >> there's no pii, except for you do know that the phone belongs to a certain user. the traditional information's already there but no additional information is left. >> mr. muller, same question, explain to my kids, how does paypal's system work and then is there any pii involved after the transaction? >> so, paypal's system, you know, works somewhat differently or it's not tied as closely to a physical device. it does involve working through an account that has to be set up to start with, either by the individual themself, if they are over 18, since that's one of our rules. >> one is there, one is not. >> or a parent. we offer a student account capability, the parents can control an account on behalf of the student. but there is that initial step of setting up an account.
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once the can the is set up, we have a broad network of merchants 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 the initial step of setting up the account. >> any pii left over after a transaction with the paypal system? >> so the pii is something that is kept only by us, so we do have it and we do have the information and the merchant has what they need, they are shipping physical goods, inevitably, that means they need a physical address to ship it to. but really, that's the extent of the information. >> and you're the new kid on the block. how does currency envision its testing phase and explain how your mobile technology works for my daughter and son? >> yeah, so we have some pretty cool technology that we are -- >> like it already, the word cool. >> that will hopefully help ease
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the path. one of the great things that we have, for example, is pay at table that frustrating experience you're at the end of the transaction in a restaurant, sitting in a restaurant, you want to pay your bill and you're waiting for the server to come over and bring your bill, we allow to you scan a qr code on the receipt, pay and leave without having to do that we allow you to stay in your car when it's 100-plus degrees in text and pay from the comfort of your car. >> thank you. >> and we allow to you pay at the drive thru without handing a card out the window to the person on the other end. pretty cool things that the phone actually when you pay the drive thru is pinged through the bluetooth energy beacon that is a fairly cool technology i assume your teenagers are will find fascinating and pii, that was the other question. >> yes, ma'am. how but guys plan on protecting that or have any transaction left over, like mr. muller said -- >> similar to mr. mueller there is some pii involved, however, we do not pass any financial information through the transaction, use tokenization, everything from a financial
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perspective is tokenized and encrypted, mean there's never any financial information stored on your phone no information of worth to anybody storeded on your phone, should your phone be stolen or hacked or taken by someone nefarious, nothing can be done with it. >> thank you. my time's up. my kids would be very happy. thank y'all. >> thank you, mr. olson. mr. welch. >> [ inaudible ] >> very goodsome 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. statement from the electronic transmissions association. a statement from the national association of convenience stores and the society of independent gasoline marketers of america. a statement from the national
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retail federation. does the ranking member have anything that should be included in the record? >> i don't, but i approve those. >> thank you. pursuant to committee rules, i remind members that they have ten business days to submit additional questions for the record. and i ask that witnesses submit their responses within ten business days upon receipt of the questions. without objection, this subcommittee is adjourned. bill clinton heads to new hampshire today for his first solo campaign events on behalf of his wife, democratic presidential candidate, hillary clinton. c-span will have live coverage of his stop in exeter at 5:15 earn followed by your phone calls. hillary clinton, on the meantime, is on two-day
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river-to-river tour of iowa. and republican presidential candidate rand paul will be in new hampshire tomorrow. c-span2 will have live coverage when senator paul holds a town hall meeting in ex-ter, that begins at 6 p.m. eastern. he answered other questions on currency topics for about 45
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minutes. >> ladies and gentlemen, students, staff, guests, i am so glad to see all of you here this afternoon. i'm ron buchanan, provost for northern virginia community college's alexandria campus and it's my task and pleasure of all things to welcome you here this afternoon to a town hall with secretary of the treasury. one of the great assets for alexandria campus is its low cages side capitol beltway and its proximity to washington, d.c. because of that location, we have had the good fortune to be the host for a number of
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dignitaries, state, federal and international even, who held forums to talk about matters of interest to the general public. today's activity at the town hall is one such event. and in order to move us on to that particular point, i'm going to turn the program over at this point to the president of northern virginia community college, dr. scott rawls, who will introduce our speaker, or guest actually, and outline the program. dr. rawls. [ applause ] >> thank you, sir. thank you. good afternoon. northern virginia community college is honored today to have a very special guest, our u.s. -- our secretary of u.s. treasury, jack lew. secretary lew


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