CFPB Proposes Increased Federal Oversight on Digital Wallet Providers

In a move designed to level the playing field and protect consumers from new risks, the Consumer Financial Protection Bureau (CFPB) has proposed a rule that could place more federal regulation on non-bank digital wallet providers such as Google, Apple, and at least 15 other major tech firms.

Growing Concern Over Non-Bank Companies

The proposal comes as the federal agency grows increasingly worried about the rising popularity of digital payment services, including peer-to-peer apps, provided by non-bank companies. Consumers are not only utilizing these digital payment tools for sending money to friends and family but also for paying bills and making in-store payments. Simultaneously, the number of consumer concerns about these services is on the rise.

Aiming for Appropriate Oversight

“Today’s rule would crack down on one avenue for regulatory arbitrage by ensuring large technology firms and other nonbank payments companies are subjected to appropriate oversight,” said CFPB Director Rohit Chopra. The agency intends to subject these non-bank digital wallet providers to the same laws banks must follow when providing similar services.

Proposed Rule Covers Major Market Participants

The proposed new rule would apply to firms handling five million or more digital payment transactions annually. Currently, this would encompass about 17 companies, which represent approximately 88% of U.S. non-bank digital consumer payments. These firms facilitated approximately 12.8 billion transactions valued at about $1.7 trillion in 2021.

Impact on Tech Giants and Digital Payments Pioneers

Google and Apple are among the companies expected to comply with the new regulations based on their digital wallet usage rates, according to anonymous CFPB officials. Digital payments pioneer PayPal, which reported 22.3 billion transactions last year, and Cash App, with its 51 million monthly users, are also likely to be affected by the proposed rule.

Next Steps

The CFPB is considering adjusting the annual transaction threshold that would determine which companies are subject to the new oversight. It is also inviting public comments on the proposal over the next two months. These actions follow the agency’s 2021 request for information from major tech players regarding their payment systems and data usage.