US consumer advocate suggests regulations for digital wallets and payments made by Big Tech

 US consumer advocate suggests regulations for digital wallets and payments made by Big Tech

With this plan, CFPB Director Rohit Chopra takes a bold step toward establishing the agency's complete control over Big Tech, which has been long expected.

The top US consumer finance watchdog said on Tuesday that digital payments and smartphone wallet services offered by internet companies should be regulated since they are similar to conventional payment systems in terms of reach and size but lack consumer protections. The plan put out by the Consumer Financial Protection Bureau (CFPB) would subject corporations like as Alphabet, Apple, PayPal, and Block's CashApp to oversight akin to that of banks. CFPB examiners would be tasked with examining the businesses' privacy safeguards, executive behavior, and compliance with laws that prohibit unfair and deceptive activities.  

According to a CFPB official, if approved, the plan would apply to around 17 businesses that together transmit more than 13 billion in payments yearly. The government did not disclose whether more systems, in addition to GooglePay, ApplePay, PayPal, and CashApp, will be protected.  

A request for comment was not immediately answered by Google, Apple, PayPal, or CashApp. The plan is CFPB Director Rohit Chopra's long-awaited and bold attempt to establish the agency's total control over Big Tech, a company he has often chastised for concerns about competition and privacy. Since taking over as director in 2021, Chopra has gradually raised the CFPB's level of monitoring of the industry. In 2021, the agency requested information about how Big Tech firms utilize consumer data, and the previous year, it initiated an investigation into their payment systems. Chopra said in a statement on Tuesday that the internet industry has branched out into financial services that were formerly supplied by the highly regulated banking industry.  

With today's ruling, regulatory arbitrage would be severely curtailed since big internet businesses and other nonbank payments providers will be subject to proper scrutiny, he added.  

In a lecture given last month, Chopra said that CFPB investigation had shown that internet firms were gathering enormous quantities of payment information from customers with no restrictions, little transparency, and murky corporate practices, placing customers at danger of being surveilled by the corporations in a manner similar to that of China. Senior CFPB officials, speaking on Tuesday's plan, stressed the need of investigating privacy compliance at these bigger companies with vast amounts of consumer data, pointing out that selling that data is a key component of many of their business models.  

Big Tech company representatives have already emphasized how hard they work to secure customer data.  

The plan on Tuesday would be applicable to businesses that process more than five million transactions annually. According to the agency, the regulation would also promote competition by guaranteeing that the internet sector and conventional financial firms would be subject to the same level of scrutiny.  

The Consumer Bankers Association referred to the plan as "a step in an opportunity direction" in a statement. "For a balanced, innovative, and competitive banking and finance ecosystem to function, consumers require to know that they are protected equally, despite who they do business with to meet their money-related needs," Lindsey Johnson, president and CEO of CBA, stated. As a representative of banks, fintechs, and large tech firms, the Electronic Transactions Association said in a statement that it aims "to ensure the recommendation achieves the goals of safeguarding consumers and consistent execution of public policy for all players."There is now a notice-and-comment process on the project, which is anticipated to finish in early 2024.