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The UK Payment Systems Regulator (PSR) and the Financial Conduct Authority (FCA) have issued a joint call for information, aiming to identify the benefits and risks of using digital wallets.
They are seeking input from stakeholders in the payments and broader financial services sectors, including digital wallet and technology providers, users of their services and other parties interested in digital wallets.
The regulators want to assess the impact on both consumers and businesses of digital wallets, and intend to collect detailed information and evidence on the benefits they offer, any features that hinder optimal payment functionality, the role digital wallets play in enhancing account-to-account payments, and any potential significant issues related to competition, consumer protection or market integrity.
The PSR and the FCA plan to release an update on all received responses by Q1 2025.
The bigger picture
According to the FCA, the use of digital wallets has grown rapidly in recent years, with more than half of UK adults now using one. On launching the call for information, the FCA chief executive said digital wallets have become a part of everyday life for many people.
Three of the most widely used digital wallets in the UK today are Apple Pay, Google Pay and PayPal, which shows that digital wallets have become a key touchpoint between big tech firms and UK consumers.
Regulators around the world are keen to ensure a level playing field between big tech and other digital wallet providers, and are closely monitoring activity in the space.
Last week, the four-year battle between Apple Pay and the European Commission’s competition authority drew to an end, with the big tech firm making new antitrust commitments that should benefit competition in the EU.
And earlier this year, the US Justice Department, along with 16 other state and district attorneys general, filed a civil antitrust lawsuit against Apple, alleging that the tech giant abuses its dominant market position to prevent any developments that would make users less reliant on the iPhone, promote interoperability, or lower costs for consumers and developers.
Why should you care?
The findings of the call for information could affect the way that digital wallets and their providers are regulated in the UK market.
If the regulators find evidence of anti-competitive practices, they will likely attempt to clamp down on the big tech providers, which will affect the way they operate in the market.
A more level playing field will also create opportunities for other businesses seeking to compete in this space.
The FCA said it wants to maximise opportunities and benefits for consumers and businesses, while protecting against any risks digital wallet technology may present. This is a goal that regulators around the world share, so they will be monitoring the situation, and any steps the PSR and the FCA take may be replicated in other jurisdictions, should they prove effective.
Stakeholders in the UK have until September 13, 2024 to respond to the call for input and any party with an interest in the digital wallet sector should consider contributing their views and expertise to ensure that the regulators have the best possible information to plan their strategy.
