The rise of mobile banking technologies poses major risks to consumers around issues of fraud, theft and input errors caused by small keypads, according to a government financial watchdog.
The Financial Conduct Authority (FCA) has published a report on the issues around mobile banking in which it noted that while the technology has clear benefits for consumers, banks and telecoms companies have a responsibility to ensure consumers are protected.
For example, it cited malware and viruses hidden with applications offered by banks as a serious threat that must be tackled.
"Malware is an important risk for firms to consider, as it can result in financial loss and undermine consumer confidence in mobile banking," the report said.
The IT running mobile systems must be robust enough to meet customer needs, or firms risk serious issues, the report noted.
"There is a risk that an IT failure could interrupt services, preventing access to mobile banking, limiting customers’ access to their money and undermining consumer confidence in these services," it said.
"The potential impact of this may grow as consumers increasingly rely on mobile banking. We recognise that firms may be under strong commercial pressure to develop and launch products quickly, which could risk services being released without sufficient testing and protection."
Even the keypads offered on smartphones were cited as a potential cause for issues, as customers could enter the wrong information.
"Mobile phones, with their smaller screens and limited keypad, may make errors more likely, therefore it is important for us to understand how firms are mitigating this risk," it said.
Clive Adamson, director of supervision at the FCA, said the preliminary report from the organisation, which is the precursor to a longer, more detailed report to be launched in 2014, was a vital piece of work to ensure this burgeoning technology was properly supervised.
"Mobile banking is an exciting development in financial services. With the market growing, now is the right time for us to take stock and, as part of the FCA's forward-looking approach, to ensure that consumers are appropriately protected,” he said.
"By publishing these initial thoughts we want to make sure that the industry knows exactly what we’re looking into, and consumers have a clearer idea of some of the potential risks."
The report comes as mobile financial transactions rocket in use, with major payment firms such as Visa, MasterCard and Barclays all innovating in this space.
Visa has predicted that 52 million contactless payments will be made every month across Europe by the end of 2013 as it declares ‘war on cash’. Meanwhile Barclays has said that £10bn has been sent via its mobile services, such as Pingit, since their introduction.
IT glitches are already a cause of serious headaches for banks, with RBS facing a £125m charge for issues in June 2012, which halted overnight payments between accounts.
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