The U.S. Consumer Financial Protection Bureau (CFPB), typically known for its consumer-centric stance, has handed Wall Street lenders a rare victory by proposing regulations on Big Tech companies encroaching on traditional banking territories.
According to Reuters, the CFPB, under the leadership of Director Rohit Chopra, known for his previous pursuits targeting Big Tech on privacy and competition issues, last week proposed new regulations aimed at reigning in payments and smartphone wallets provided by tech giants like Apple and Google.
The argument behind the move is that these tech behemoths now offer financial services on a scale and scope comparable to traditional banks, necessitating similar consumer safeguards.
This unexpected regulatory push provides a competitive advantage to traditional lenders who have been grappling with a barrage of new rules, ranging from capital hikes to caps on debit and credit card fees and tougher fair lending standards.
Read more: CFPB Begins To ‘Muscle Up’ AI Regulations
“The banks are under almost a bunker mentality right now. They are getting hit from a lot of different places,” remarked Todd Phillips, a professor at Georgia State University. “So when a regulator basically says, we are going to start treating your competition a lot like the way we treat you, that is good news.”
The oversight of Big Tech in the financial services sector in the U.S. has been fragmented, with companies having to navigate different state regulations for money transmitter licenses and being subject to oversight by various regulators.
Under the proposed CFPB rule, the supervision of Big Tech would be significantly tightened, requiring compliance with rules on privacy protections, executive conduct, and prevention of unfair and deceptive practices.
This marks a pivotal moment for companies such as Apple, Google, PayPal, and Block’s CashApp, as they would be among the seventeen entities affected by the proposed regulations. Collectively, these companies facilitated approximately $1.7 trillion worth of payments in 2021, according to CFPB estimates. To put this in perspective, the total value of non-cash payments (excluding wire transfers primarily used for large transfers) in 2021 was $128.51 trillion, as per Federal Reserve data.