WASHINGTON (Reuters) - Fast, efficient mobile payments could be a huge boon to business but companies must ensure customer data is safe and provide users with recourse in case of fraudulent or incorrect billing, the Federal Trade Commission said in a report on Friday.
The commission also urged every company in the mobile payment chain to track payments so customers know who to contact if there is an error; to tell customers what data is collected and why; and allow customers to block all third-party charges.
As the world goes increasingly mobile, payment companies are getting into the act. Mobile service providers allow consumers to put charges on mobile bills while credit card companies like MasterCard are moving toward offering a digital payment services.
Google has also moved the mobile payment space with its "wallet" offering.
This lays the groundwork for a huge increase in mobile payments but that growth could lag because 42 percent of people surveyed cited security as the primary reason that they refrain from making mobile payments.
To allay these and other concerns, the FTC recommended that mobile payment service providers clearly convey to customers what they can and cannot do in terms of removing incorrect charges.
For example, charges placed on credit cards would be protected in the same way that charges made with plastic are protected. But other mobile payments, such as those based on preloaded debit cards, may not.
"Companies should develop clear policies regarding fraudulent and unauthorized charges and clearly convey these policies to consumers," the FTC said in its 17-page report.
The FTC also urged every company in the mobile payment chain to track payments in order to make it easier for consumers to fight back if they find unauthorized charges like music downloads, voicemail, ringtones and online news "crammed" onto their mobile bill.
"Cramming" costs consumers $2 billion a year, according to a Senate inquiry completed in 2011.
Mobile carriers should be able to allow consumers to block all third-party charges and explain how to dispute unauthorized charges, the FTC said in its report.
The FTC also urged all companies in the mobile data chain -- from app sellers to telecommunications companies -- to encrypt the entire payment chain and take other steps to ensure that consumers' data cannot be hacked and used to steal from them.
"The reputation of the industry as a whole may suffer if consumers believe lax security practices are the norm," the FTC said.
The FTC urged companies offering mobile payments to tell consumers what data is being collected and how it is being used.
"Companies should provide reasonable security for consumer data and should limit data collection to that which is consistent with the context of a consumer's interaction with that company," the report said.
(Reporting By Diane Bartz; Editing by David Gregorio)