Big Tech fights back over digital wallet regulation

Big Tech companies like Apple Google and others that provide digital wallets and payment apps are fighting back from suggested regulatory oversight by US watchdog.

Big Tech fights back over digital wallet regulation

Back in September 2023, The Consumer Financial Protection Bureau, one of the US government’s top consumer watchdogs, warned tech giants about being overly restrictive in access to payments apps and stifling innovation.

Now, the Computer & Communications Industry Association (CCIA) – whose members also include Amazon, Facebook parent Meta and X, have responded to the CFPB’s proposal, which which also suggested Big Tech wallets services rivalled traditional payment methods but lacked the same consumer safeguards.

The CFPB proposal, which has yet to be finalized, would subject such companies to the same kind of supervision currently imposed on banks, with agency examiners inspecting compliance with laws on unfair or deceptive practices and privacy protections, as well as scrutinizing executives’ conduct.

Officials expect the proposal, as currently written, would cover 17 companies responsible for 13 billion payments annually.

Bank industry representatives have reacted well to the proposal, saying companies that provide bank-like services should be regulated and supervised like banks.

However, Krisztian Katona, CCIA’s head of regulatory policy, said in a statement that the proposal risked doing more harm than good “as broad, overly burdensome or heavy-handed digital regulation could significantly hinder new start-ups in this industry.”

In a comment letter to be submitted to the CFPB, CCIA said the CFPB’s proposal had failed to identify the specific risks to consumers it sought to address and improperly viewed non-bank digital providers and banks as direct competitors.

“Even if there are some instances where banks and nonbank entities compete, the reality of the market shows that there are more instances where their synergies help consumers, providing complementary services,” the letter said.

In a separate comment letter also released, the Financial Technology Association, whose members include PayPal, which owns the service Venmo, and Block, which operates Cash App, shared similar concerns.

It said existing regulations were sufficient and called on the CFPB to suspend the rulemaking process.

“It’s worth keeping in mind as the CFPB considers further regulations on digital services that consumer feedback seems to point towards a general satisfaction with payment services, which suggests the absence of a market failure in the sector,” continues Katona.

“We would urge regulators to tailor new regulations to specific problems they want to fix.”