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By scrutinising the digital wallet provider’s arrangements with US payment networks, the UK Financial Conduct Authority (FCA) is aligning with the Competition and Markets Authority (CMA) in challenging global giants.
The regulator’s announcement, issued in early May 2026, that it is investigating PayPal, Mastercard and Visa for alleged anti-competitive behaviour could signal a shift in the focus of its activity.
The FCA confirmed the investigation after PayPal noted in an SEC filing that it had received notices of investigations and related requests for information under the Competition Act 1998. It went on to note that it is “cooperating with the FCA in connection with these investigations”.
In its short statement, the regulator confirmed that it is investigating Mastercard, PayPal and Visa under Chapter I of the Competition Act 1998, and Mastercard and Visa under Chapter II of the same act, on suspicion of anti-competitive conduct.
Although the FCA stressed that it has not yet reached any conclusions on whether competition law has been broken, the targeted nature of the probe, focusing on the “funding and usage” of PayPal’s digital wallet, suggests that the investigation may be part of a systematic regulatory strategy.
Enforcing competition law
The investigation is a rare use of the FCA’s concurrent competition powers. Historically, the FCA has been a conduct regulator, while the CMA has handled antitrust matters.
In January, the CMA announced that it is looking into Apple and Google’s mobile ecosystems, including operating systems, app stores and mobile browsers.
The regulator’s statement said that its investigation will focus on the big tech players’ impact on people who use mobile devices and on businesses developing innovative services or content such as apps for these devices.
The revelation of the FCA’s probe suggests we may be seeing a pincer movement, with the CMA scrutinising Apple and Google on hardware issues and the financial watchdog examining the conduct of PayPal, Mastercard and Visa on the contractual side.
The creation of a unified digital competition strategy spanning tech and finance in the UK would be a significant development that could impact the dominance of big players to the benefit of smaller tech providers and fintechs.
The move signals an aggressive, “competition-first” regulatory era for the country, in line with the government’s strategic steer to the CMA.
For the payments sector, it is a warning that the FCA is moving from supervising firms to ensuring a competitive market environment. Major fintechs such as Revolut or Wise may now face similar scrutiny over their partnership terms.
Continuing the PSR’s work
It is notable that the FCA, not the Payment Systems Regulator (PSR), has instigated the probe, a sign that things are moving on as the transition to a single regulator progresses.
Some had wondered whether the FCA would retain all of the PSR’s areas of focus as it absorbed the specialist regulator, or whether some would be quietly dropped.
Given that the UK government is keen to appear pro-business and to spur economic growth, the fear was that the FCA would be pressured not to be overly interventionist on some issues that were within the PSR’s remit.
However, in challenging Visa and Mastercard, the FCA is picking up the PSR’s work on fees and competition issues relating to the big card schemes. By taking on the card networks, the regulator is demonstrating that organisational consolidation will not dilute scrutiny.
Promoting choice
In its investigation, the FCA is specifically looking at how PayPal’s agreements with the major card networks might restrict how users fund their wallets, steering them towards using cards rather than cheaper bank transfers.
If the FCA forces greater transparency and choice in how wallets are funded, it will enable open banking providers to compete directly with the Visa/Mastercard duopoly within the PayPal ecosystem.
The FCA’s move to challenge these major global players on competition aligns with its consumer-first approach to the evolution of open banking, outlined in the open finance roadmap. Its focus is on maximising value for consumers and supporting businesses in their product development, which maps on to the CMA’s stated goals with its investigation of Apple and Google.
One of the FCA’s Payments Priorities is to promote competition, innovation and growth in open banking and open finance, and the PayPal investigation could represent a new front in the regulator's efforts to boost adoption and ensure the smooth functioning of open banking.
The UK’s National Payments Vision (NPV) also seeks to embed a modernised payments system that features seamless A2A payments, in part to reduce reliance on card networks and lower costs for merchants.
If the FCA’s investigation finds that Mastercard and Visa used contractual provisions to stifle bank-linked payments within PayPal, it could lead to a mandatory rewiring of digital wallets.
This would be a step forward for the NPV and its goal of establishing the UK as a leader in non-card retail payments, including making A2A payments mainstream by 2027.
Developing a regulatory playbook
The FCA’s investigation into the deals between PayPal and the major card networks represents more than just a localised contractual dispute.
If the regulator establishes that Mastercard and Visa used restrictive clauses to box out bank-linked payments, it may move to impose a major change on how digital wallets operate.
The outcome of the probe could determine the regulatory playbook for how payment apps must design their user interfaces to ensure that alternative payment methods operate on a level playing field with the card networks.
By forcing the world’s largest digital wallet to open its gates to open banking, the FCA would help to make A2A payments a mainstream, default reality in the UK by 2027.
For global regulators, developments in the UK could create a blueprint for dismantling the card payment duopoly worldwide.
