The Consumer Financial Protection Bureau, one of the US government’s top consumer watchdogs, has warned tech giants about being overly restrictive in access to payments apps, a direct threat to Apple and its Apple Pay contactless technology.
US Watchdog eyes Apple Pay market access
Because Apple Pay and Google Pay dominate the mobile-device contactless market in the US, the constraints they impose on app developers’ ability to use the technology could inhibit consumer choice, the CFPB say.
Apple requires iOS device users to turn to Apple Pay for tap-to-pay transactions, barring direct integration with apps such as Venmo.
While Google’s Android operating system does not, the concern is that Google “could reverse this position in the future,” the bureau said.
Bureau Director Rohit Chopra said that Apple and Google are acting as “choke points” to the US payment system, cutting off innovation by keeping other apps out.
“Regulations imposed by Big Tech firms have a big impact on whether consumers and businesses can make payments using third-party apps,” Chopra said during a fintech conference organised by the Philadelphia Federal Reserve.
“We need strong challenges to dominant Wall Street banks and card networks,” he added. “But there is real concern that the largest technology firms will be able to erect even more gates and toll booths that will prevent the smallest firms from emerging, raising capital, growing, and succeeding even when they offer a superior technology.”
Chopra’s comments follow a long-awaited report published by the CFPB that focused on the impacts of Big Tech policies on tap-to-pay functions used on mobile devices like smartphones and watches.
Apple and Google set regulations that govern app developers’ ability to integrate NFC technology into their apps, which is needed to execute the tap-to-pay transactions. If an app does not comply with their regulations, the app can be denied access or face removal.
“There’s no comparable gatekeeper as we know for accessing service through a web browser,” Chopra said.
As of Q2 2023, Apple’s iOS operating system was on 55% of smartphones shipped in the US, and Google’s Android operating system was on 45% of smartphones shipped.
The dominant market share of these two operating systems, coupled with the increasing shift toward mobile device payments, underscores the important role their policies and practices play in retail payments.
Chopra says the CFPB is carefully evaluating the role Big Tech plays in banking and payments systems and that regulators will have to closely examine how business practices might impede a fair payment system for consumers, merchants, and nascent competitors.
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