CFPB’s New Rules Target 13 Billion Big Tech App and Digital Wallet Transactions

Will new rules governing digital wallets and apps blunt Big Tech innovations — or put desperately needed guardrails in place?

The Consumer Financial Protection Bureau’s proposed rulemaking, announced Tuesday (Nov. 7), would extend the same supervision to those digitally-native firms that already is in place for banks and credit unions, specifically aimed at companies with more than 5 million transactions annually. The Big Tech marquee names that would be most immediately affected include PayPal, Meta, Amazon and others.

The CFPB noted in the proposal: “The CFPB is authorized to supervise nonbank covered persons … for purposes of (1) assessing compliance with Federal consumer financial law; (2) obtaining information about such persons’ activities and compliance systems or procedures; and (3) detecting and assessing risks to consumers and consumer financial markets.”

Familiar to and Used by a Majority of Consumers

The CFPB cited stats that “76% of Americans have used at least one of four well-known P2P payment apps” and stated later in the document that “such applications now have a share of eCommerce payments volume that is similar to or greater than other traditional payment methods such as credit cards and debit cards used outside of such applications.”

In terms of overall scope, the CFPB estimated that “the proposed threshold would bring within the CFPB’s supervisory authority approximately 17 entities,” equating to “about 9% of all known nonbank covered persons in the market for general use digital consumer payment applications.” Those entities facilitated about 12.8 billion transactions in 2021, with an estimated dollar value of about $1.7 trillion, covering 88% of known transactions in the nonbank arena.

And, separately, coming into 2023, PYMNTS’ Intelligence research in collaboration with Nuvei detailed on a global stage that the mobile wallet usage for brick-and-mortar purchases rose by as much as 9% year on year — and remained the most popular alternate purchasing method for U.S. shoppers, used by 59% of those consumers.

Much remains to be finalized. The proposed rulemaking document also stated that the CFPB “is also considering a lower or higher threshold” of transactions. Lowering that threshold to 1 million transactions would bring more companies under the CFPB’s purview.

The CFPB’s proposed rulemaking has already drawn some criticism. Rep. Patrick McHenry of North Carolina, chairman of the House Financial Services Committee, said in a statement Tuesday that the CFPB’s actions represented “a step in the wrong direction. Consistent with the bureau’s track record, this proposed rule will only entrench the status quo by impeding the adoption and development of innovative products and services. This paired with Director [Rohit] Chopra’s recent actions will only limit nonbanks’ ability to offer products and services consumers and small businesses rely on — eliminating choice and competition in our payments system. The CFPB is once again stretching its supervisory authority to the detriment of the consumers the agency was created to protect.”

The commentary period runs into the beginning of 2024, and the battle lines are likely to be sharpened in the days and weeks ahead.