UK regulators are probing the competitiveness of digital wallets provided by the likes of Apple Inc, Alphabet Inc’s Google and PayPal Holdings Inc as well as what risks these new technologies bring for the consumers and businesses that rely on them.
As part of a wide-ranging fact-finding exercise debuted on July 15, the Payment Systems Regulator and Financial Conduct Authority have asked industry participants to answer a series of questions about the wallets that range from what fees providers reap when consumers use the technology to what harms could arise if a digital wallet provider suffered an operational failure.
“We want to make sure we can maximise the opportunities and benefits for consumers and businesses while protecting against any risks this technology may present,” the FCA’s chief executive officer Nikhil Rathi said in a statement announcing the new review.
The watchdogs’ interest comes just days after a ruling by European Union regulators, who decided against fining Apple after the company agreed to open up its tap-and-pay technology to other providers free of charge for a decade. Under the EU settlement reached last week, Apple’s customers in Europe will now be able to use alternative digital wallets to pay for goods and services at checkout, a move that’s been seen as a boon for players like PayPal, Alphabet’s Google Pay or Samsung Electronics Co’s Samsung Pay.
The two UK regulators vowed to share information they collect with their counterparts at the UK’s Competition and Markets Authority. One area they expressed interest in is how digital wallets might help banks promote account-to-account payments, which allow consumers to pay directly from their bank accounts rather than relying on card networks like Visa Inc and Mastercard Inc.
The PSR has previously said it’s concerned that those payment giants have no effective competition in the UK.
In their joint paper, the UK’s watchdogs found it is likely more than half of the country’s adults use a digital wallet to some extent.
“Digital wallets are steadily becoming a go-to payment type,” David Geale, the managing director of the PSR, said in the statement. “While this presents exciting opportunities, there might be risks too.”
The regulators found people tend to use digital wallets more for everyday spending than for high-value items. Last year, about 14% of point-of-sale terminal transactions and 38% of e-commerce transactions by value involved a digital wallet of some kind.
Industry participants have until Sept 13 to respond to the regulators’ call for information. The watchdogs committed to publishing an update on their findings in the first quarter of next year. – Bloomberg