The leading consumer financial watchdog in the US has put forward a proposal to regulate digital payments and smartphone wallet services offered by tech giants.
The move comes in response to the significant impact these services have had on the financial landscape, with the regulator highlighting the need for consumer protection measures.
The Consumer Financial Protection Bureau (CFPB) has introduced a proposal that would subject companies like Alphabet, Apple, PayPal, and Block’s CashApp to a level of supervision typically associated with traditional banks.
Go deeper with GlobalData
CFPB examiners would scrutinise these tech giants’ privacy protections, the conduct of their executives, and their compliance with laws aimed at preventing deceptive practices.
Should this proposal be finalised, it would encompass around 17 companies responsible for more than 13 billion payments annually, an official from the CFPB told Reuters.
The agency did not disclose the names of other platforms that would fall under this regulatory umbrella, apart from GooglePay, ApplePay, PayPal, and CashApp.
This move represents a significant and long-awaited step by CFPB Director Rohit Chopra to extend the agency’s authority over Big Tech. Chopra has been an outspoken critic of the sector, citing concerns related to privacy and competition.
In 2021, the agency sought information on how these companies handle consumer data, and last year, it launched an inquiry into their payment platforms.
In a statement, he expressed that this new rule aims to address regulatory arbitrage by ensuring that large technology firms and other nonbank payment companies receive appropriate oversight.
Chopra also highlighted that research conducted by the CFPB revealed tech giants’ collection of extensive consumer payment data with minimal constraints, limited transparency, and complex corporate policies, raising concerns about potential surveillance reminiscent of Chinese practices.
The proposed regulation would address privacy compliance at these major firms, many of which rely on monetising consumer data as a core part of their business models.
The proposal would apply to companies processing more than five million transactions annually, fostering competition by subjecting both traditional financial institutions and the tech sector to the same oversight.
The Consumer Bankers Association welcomed the proposal as a positive step, emphasising the importance of equal consumer protection.
The Electronic Transactions Association, representing banks, fintechs, and big tech companies, expressed its interest in ensuring that the proposal aligns with consumer protection goals and consistent public policy application across all industry players.
This proposal will undergo a notice-and-comment period, expected to conclude in early 2024.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalData
