A suggestion by the US Consumer Financial Protection Bureau (CFPB) to regulate digital wallets and other virtual payment apps ruffled the feathers of the Computer and Communications Industry Association (CCIA). This organisation represents tech biggies such as Apple (AAPL), Alphabet Inc. (GOOG), Amazon.com, Inc (AMZN), and Meta Platforms Inc. (META).
Big Tech and financial watchdog clash over regulation of digital payments
The CCIA maintains that supervising the companies that offer digital payment services will choke innovation and progress, and hamstring startups in the industry. This response followed a November 2023 statement by the CFPB, which claimed that financial operations such as smartphone payments and digital wallets emulated traditional payment methods but fell short of user protection.
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Although not yet finalised, the CFPB proposed that big tech firms be subjected to the same financial scrutiny as banks. The watchdog recommended inspections of these practices to ensure legal compliance and privacy protections and rule out unfair or misleading trends.
As it currently stands, these new steps would include 17 companies, which realise approximately 13 billion payments per year at present. Despite the concerns from the tech arena, traditional banks support this move and feel bank-like financial services should undergo the same supervision as conventional banks.
According to Reuters, Krisztian Katona, the head of regulatory policy at the CCIA, believes this type of regulation will stymie innovations and the entry of new participants into the digital finance sphere. Reportedly, the CCIA stated the financial watchdog failed to pinpoint specific risks associated with digital payments and incorrectly compared digital services to traditional banking.
