Promoting competition in payments

As consumers increasingly move and store their money using mobile device apps, we have seen a rise in Big Tech conglomerates extending their reach into banking and payments. There has been a recent market development that might affect the availability of payment apps for Americans who use Apple iOS devices.

Last September, the CFPB published a report analyzing the growing “tap-to-pay” market, where consumers tap a device enabled with near field communication technology (NFC) to make a payment at the point of sale. We found that the makers of the two dominant mobile operating systems, Apple and Google, impose regulations governing how financial companies and app developers offer secure payments using “tap-to-pay” functionality. The CFPB’s analysis showed that Apple’s regulations in the U.S. were very restrictive, blocking access to “tap-to-pay” functionality for popular payment apps, other than its own proprietary app, Apple Pay. This policy inhibits new innovations and consumer choice.

In March, the Department of Justice sued Apple. Part of the lawsuit focused on the restrictive regulations on “tap-to-pay”. The CFPB has also heard from regulators and central banks from around the world that are concerned about Apple’s regulations.

Earlier this month, Apple announced that it would be amending its regulations so developers can build apps to facilitate payments outside of Apple Pay and Apple Wallet, including “tap-to-pay” transactions. Developers will need to pay fees to Apple and agree to other conditions. The announcement did not detail those fees or conditions.

The CFPB is working to better understand further details about Apple’s announcement to determine whether it is a meaningful shift away from blocking competitive payments offerings from banks, credit unions, and technology companies other than Apple. We encourage developers and others with a stake in Apple’s regulations on contactless payments to contact the CFPB’s Office of Competition and Innovation.

This October, the CFPB will be finalizing rules to accelerate the shift to “open banking” in the U.S., which would enable consumers to switch to competitors with better rates and superior service, while still safeguarding their personal financial data. Ensuring that there is a competitive ecosystem for consumer payments will be critical.