The report highlights the far-reaching effects of Big Tech’s policies on mobile tap-to-pay features, revealing how Apple and Google’s regulations are reshaping the landscape of mobile payments.
09/13/2023 12:15 P.M.
2 minute read
In a report published last week, the Consumer Financial Protection Bureau explores the regulations surrounding mobile payments, particularly the “tap-to-pay” feature found on smartphones and smartwatches.
One of the key takeaways from the report is the explosive growth of tap-to-pay usage in the U.S. The adoption of this payment method has surged in recent years, with estimated transactions reaching nearly $300 billion across platforms like Apple Pay, Samsung Pay and Google Pay. Analysts predict that digital wallet tap-to-pay transactions could witness a growth of 150% by 2028. Of the 130 million iPhone users in the U.S., a significant portion have embraced Apple Pay, with 55.8 million making in-store payments using the service in April 2023 alone.
While Apple strictly prohibits third-party payment apps from accessing the near field communication (NFC) technology necessary for tap-to-pay transactions, Google’s Android system currently allows such access. This inconsistency in policies raises questions about the potential impact on the future of mobile payments.
The bureau suggests that restrictive tap-to-pay practices could limit consumer choice and stifle innovation in the payment industry. Apple’s NFC policy, for instance, prevents the direct integration of tap-to-pay functionality into existing banking and payment apps like PayPal, Venmo and Cash App. This limitation may hinder the development of a more open banking ecosystem that empowers consumers and fosters competition.
“Regulations imposed by Big Tech firms have a big impact on whether consumers and businesses can make payments using third-party apps,” said CFPB Director Rohit Chopra. “We are carefully evaluating Big Tech’s role in our banking and payments system.”
The CFPB is focusing its broader efforts on monitoring the shift toward open banking in the U.S., including the rise of multi-service super apps. Additionally, the bureau is undertaking a rulemaking initiative to clarify consumers’ personal financial data rights, potentially accelerating the transition to open banking. As the retail payments landscape evolves rapidly, the CFPB aims to evaluate how regulatory changes can either support or disrupt this transition.