Safety fears over mobile banking

Steve Hawkes By Steve Hawkes, Consumer Affairs Editor

The Financial Conduct Authority (FCA) also wants banks to spell out their policies for when a customer makes a mistake such as paying the wrong recipient or typing in the wrong amount in a transfer via his or her smartphone app. 

Details of the "thematic review" will be released today and it comes amid growing fears the market is developing at such a speed it will be difficult for Britain's biggest high street banks to keep up. 

Research earlier this year showed that one in five adults across the UK have made a payment over their mobile phone or iPad. A quarter of us use our smartphones to check our balances. 

Just last week the Payments Council said it believed mobile phones would be used for 1.5 billion transactions a year by 2020, up from the current 356 million. Mobile phones are already used almost as much as the chequebook to settle debts. 

Clive Adamson, the FCA's supervision director, said: "The technology that is now contained in a smartphone is greater than most computers had only a few years ago and mobile banking has the potential to rapidly increase in popularity. 

"We approach this review with clear outcomes in mind. We want to support innovation that provides consumers with products that meet their needs and expectations while also ensuring their interests are protected." 

The FCA is understood to be particularly concerned about banks that use third parties to help support their IT infrastructure, following the Royal Bank of Scotland network crash last summer that cost the bank £175 million and forced former chief executive Stephen Hester to forgo his bonus. The FCA said: "There is a risk there may be a chain of companies involved in a customer's transaction, resulting in a greater likelihood of a problem occurring." 

Just last October, NatWest was forced to suspend its 'GetCash' app-based service after a 'phishing' attack by fraudsters. In the US, Bank of America's online and mobile phone banking service crashed on February 1, sending customers into a panic. 

The FCA is also worried about the widespread potential for mistakes by customers given way mobile apps have made it far simpler to transfer money. NatWest's 'GetCash' app allows customers to withdraw money at an ATM by simply asking for a secure code, which they can even text to a friend or builder they owe. 

Barclays 'PingIt' app, downloaded by 1.5 million people, allows registered users to 'ping' cash to each other simply by entering their mobile phone number. 

Industry figures said the FCA was keen to know how banks would react if a customer, who had drunk too much when making a mistake, complained and wanted their money back. The FCA would not be drawn on the issue of alcohol, but said: "There is a greater chance consumers may encounter difficulties using mobile banking, compared with more traditional services. 

"This could result in consumers making errors, such as paying the wrong recipient."