Regulating Internet Payment Intermediaries

Ronald J. Mann, Columbia Law School


This paper examines legal and policy issues raised by changes in payment methods related to the rise of the Internet. The two major changes – the rise of P2P systems like PayPal, and the rise of Internet billing systems (EBPP) to replace the use of paper bills and checks – both involve new intermediaries that facilitate payments made by conventional payment systems. The paper first discusses how those systems work. It then discusses problems in the framework currently used to regulate those systems in the United States, which has not been updated to protect consumers from the special problems those systems raise. Finally, the paper considers problems with the potential shift of payments services from the heavily regulated banking industry to new and unregulated Internet-related startups. The paper considers a variety of strategies for producing a level field of competition between banks and the new entities and at the same time providing adequate protection for the consumers that use the systems in question.