US Watchdog Implements Final Rule to Oversee Big Tech Payments and Digital Wallets

The U.S. Consumer Financial Protection Bureau (CFPB) has finalized a new rule that will subject major tech companies processing over 13 billion financial transactions annually through digital wallets and payment apps to government supervision. This regulation aims to enhance consumer protection, ensuring privacy and preventing fraud in the rapidly evolving digital payment landscape.

Key Takeaways

• The rule applies to companies processing at least 50 million transactions annually.
• It focuses solely on U.S. dollar transactions, excluding digital assets.
• The regulation is designed to protect consumer data and prevent account fraud.
• The rule will take effect 30 days after its publication in the Federal Register.

Overview Of The New Rule

The CFPB’s new regulation marks a significant shift in how digital payment services are monitored. Previously, these services operated with minimal oversight, but the CFPB’s decision reflects the growing importance of digital payments in everyday transactions. The rule is expected to bring these services under the same scrutiny that traditional banks face, ensuring compliance with federal laws.

Implications For Big Tech Companies

The final rule will impact several major players in the digital payment space, including:

• Apple Wallet
• Google Pay
• Venmo
• Amazon Pay
• PayPal
• Intuit

These companies collectively account for a significant portion of the market, with seven unnamed nonbank firms responsible for 98% of the estimated activity. The CFPB’s oversight will require these companies to implement detailed internal compliance measures, similar to those already in place for banks.

Industry Reactions

The response to the new rule has been mixed. Some representatives from the banking industry have welcomed the increased regulation, arguing that companies providing bank-like services should be held to similar standards. However, the Financial Technology Association has expressed concerns, urging the CFPB to reconsider the rule, stating that it does not address any clearly identified problems in the current system.

Changes From Initial Proposal

The final rule includes several significant changes from the CFPB’s initial proposal:

1. Transaction Threshold: The threshold for coverage has been raised from 5 million to 50 million transactions per year.
2. Currency Focus: The rule will now only apply to transactions conducted in U.S. dollars, excluding digital assets that can be used for purchases.

These adjustments reflect the CFPB’s efforts to refine the regulation based on industry feedback and the evolving nature of digital payments.

Next Steps

The new rule is set to take effect 30 days after its publication in the Federal Register, marking a new era of oversight for digital payment services. As the landscape of financial transactions continues to evolve, the CFPB’s regulation aims to ensure that consumer protections keep pace with technological advancements. The future of this rule may also be influenced by upcoming changes in federal regulatory leadership, as President-elect Donald Trump prepares to take office, potentially reshaping the regulatory environment for Big Tech companies.

Sources

• US watchdog issues final rule to supervise Big Tech payments, digital wallets | Reuters, Reuters.