By Simone Backer

Mobile payments (m-payments) have been gaining in popularity over the past decade. When paying via cell phone, consumers typically type their phone number into a website or mobile application, receive an authorization text, respond with a PIN number or simply “Yes” to confirm that they initiated the purchase, and then add the cost to their monthly phone bill.

This payment method is much simpler than paying with a credit or debit card online; but while the convenience of m-payments may be high, the protections are very weak.

The m-payment industry is relatively new, so there are a number of risks associated with making purchases on a cell phone. For example, mobile payment companies may currently use their customers’ information to target certain demographics for ad campaigns or special services, which many consumer advocacy groups consider a breach of privacy.

Theoretically, m-payment companies have to register with the Financial Crimes Enforcement Network (FinCEN) and comply with their regulations for money service businesses. However, few businesses register and if they do, their regulations are rarely enforced. Many m-payment networks even have security features that hinder law enforcement services that are trying to detect questionable transactions. For more information on mobile payments' current security issues, check out this article from the U.S. State Department.

Zong is one of the major players in the rapidly growing mobile payment industry. Two major clients it boasts are Facebook’s credits (which are used in popular games like FarmVille and Mafia Wars) and Mochi Media’s “Mochi coins”. Their games are designed to addict nonpaying users until they’re willing to exchange real money for features that enhance their game-playing experience. The simplicity of mobile payments increases the likelihood that gamers will start and continue to pay for the games’ paid features, but a pattern of making many quick micropayments can add up to significant spending — and there are no guaranteed protections if something’s wrong with the bill.

One commenter on a cnet.com article insisted, “I will keep my [credit] card as long as I can. The phone companies will not help you if a charge is posted … just look at the scams for overseas charges and tell me if any phone company has ever helped in having the charges dropped.” Other mobile payers have voiced their concerns about how easily strangers can access cell phone numbers, especially when contrasted with how safeguarded credit card numbers typically are.

The m-payment industry has a long way to go until it is regulated to the current standards of credit and debit cards. However, it seems like many cell phone users — especially young adults and teens who don’t have access to a credit or debit card — are willing to prioritize convenience over security and other fraud protections. Click here or post a comment below to share your story about mobile payments.