(Bloomberg) -- The top US consumer watchdog will supervise Apple Inc. and other major technology firms that offer digital wallets and payment apps, finalizing a proposal from last year with several changes.
The US Consumer Financial Protection Bureau will now treat those companies more like banks as long as they handle more than 50 million transactions a year, conducted in US dollars, according to a statement Thursday. The original proposal set the supervision threshold at 5 million annual transactions.
“Digital payments have gone from novelty to necessity and our oversight must reflect this reality,” CFPB Director Rohit Chopra said in the statement.
More consumers are turning to digital wallets and payment apps to complete everyday transactions, and competition in the area has intensified, with Apple Pay leading the pack. Digital wallet use among US consumers jumped to 62% last year from around 47% in 2022, according to Federal Reserve surveys.
While the financial regulator can already take action against companies that break the law, the new rule would allow the CFPB to regularly supervise the large digital-wallet and payments firms and their practices.
“Consumers shouldn’t have to choose between the convenience of digital payment apps and the safety and security of their money and privacy,” the advocacy group Consumer Reports said in a statement. “The CFPB’s new rule will enable the Bureau to protect consumers from unfair practices through regular examinations of digital payment app providers before issues become widespread.”
The CFPB will supervise around seven technology companies that account for virtually all of the market, according to a spokesperson. The initial proposal would have affected around 17 firms.
The Financial Technology Association, a fintech lobbying group, called the regulation “deeply flawed.”
Penny Lee, the group’s president and chief executive officer, criticized the plan for “failing to define a market or identify specific risks to consumers, and conflating diverse uses and products into a one-size-fits-all approach.”
Since the CFPB proposed the rule last year, Apple opened up use of its near-field communication payment chip, changing its long-held practice of limiting banks or other payment firms’ use of the technology. The strategy shift followed a deal with European Union financial regulators that required the Cupertino, California-based company to provide free access to its wallet technology for a decade.
PayPal Holdings Inc. recently disclosed that it’s working with the CFPB to answer questions about back-up payment options in its own digital wallet.
The final rule will take effect 30 days after it’s officially published in the Federal Register.
(Updates with additional context on firm oversight, lobbying group comments starting in sixth paragraph.)
©2024 Bloomberg L.P.
