Text usury

[Dave Birch] In the April E-Finance and Payments Law and Policy (a fine journal), I read about text message loans in Finland (and the rest of Scandinavia), a subject about which I knew absolutely nothing but found absolutely fascinating. Here’s what’s going on. The consumer sends a text message to the company offering the loan (these are typically in the range 50 to 200 euros). The message contains the consumers ID number and bank account details as well as the amount of the loan. The company checks the consumer’s credit and, if it is acceptable, sends back a link to web site with the terms and conditions. Once the consumer accepts these (by hitting “OK” on the relevant web page) the money is sent to their account. The companies do not charge explicit interest, but instead charge an arrangement fee (which is the equivalent, often, of an APR of several hundred percent). Wow.

Naturally, the regulators are unhappy on a few counts.

The agency has found that customers can get money transferred to their own bank accounts using another person’s cell phone and national identification number.

[From Cell Phone Loans Might Be Too Easy : NPR]

That’ll do it. Still, it’s a sign of the times that the almost universal penetration of mobile phones and the widespread “trust” in them as infrastructure, means that offering loans via text is seen as a reasonable business when text offers no encryption and no authentication. And that’s both ways. Who cares, you might wonder? Well, what happens when consumers get used to seeing texts from the their bank? They certainly want them, as well as lots of other banking services…

A third of those surveyed (33 percent) also said they would like to receive text message alerts from their financial institutions. The survey also finds that on-the-go mobile purchases are on the rise. About 25 percent of mobile phone users with mobile access to the Internet now use their devices to buy goods and services online via a credit card. One in five respondents (20 percent) said they would like to someday use their phones like a “mobile wallet”, where charges would be billed directly to their mobile accounts.

[From Harris Interactive | News Room – New Harris Interactive Study: Consumers Increasingly Embrace Mobile Phone Commerce With Banking and Buying On-The-Go]

It’s clear, as I said at a meeting today, that the mobile phone is the most important device in banking strategy right now, not the PC. So, as a corollary, the security of mobile is the most important security in banking strategy right now. One day soon, I’m going to get a text that purports to come from my bank, but is actually from 419 fraudsters…

These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]