Regulations imposed by mobile operating systems owned by “big tech” companies can have a significant impact on innovation, consumer choice, and the growth of open and decentralized banking and payments in the U.S., according to a report issued Thursday by the federal consumer financial protection agency.
According to the “issue spotlight” issued by the Consumer Financial Protection Bureau (CFPB), policies and procedures imposed by the companies have “a big impact on whether consumers and businesses can make payments using third-party apps.” The report highlights Apple Pay, noting that big tech firm Apple forbids banks and payment apps from accessing the tap-to-pay functionality on Apple iOS devices and imposes fees through Apple Pay.
The report asserts that, as of the second quarter of 2023, Apple’s iOS operating system was on 55% of smartphones shipped in the U.S., and Google’s Android operating system was on 45% of smartphones shipped. (The report notes that Google’s Android operating system does not yet share the same policy that Apple imposes forbidding access to top-to-pay).
“Apple and Google set regulations that govern app developers’ ability to integrate near field communication (NFC) technology into their apps, which is needed to execute tap-to-pay transactions,” the agency said. “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.”
In a statement, CFPB Director Rohit Chopra said regulations imposed by big tech firms have a big effect on consumers and business use of making payments using third-party apps. “We are carefully evaluating Big Tech’s role in our banking and payments system,” he said.
The report also noted:
- Consumer usage of tap-to-pay options in the U.S. has neared an estimated $300 billion across Apple Pay, Samsung Pay, and Google Pay. It asserted that some analysts estimate that digital wallet tap-to-pay transactions will grow by over 150% by 2028.
- Apple’s iPhone and other iOS devices do not permit third-party payment apps to access the NFC technology that is necessary to execute tap-to-pay contactless payments. Apple’s proprietary payment app, Apple Pay, is the only option for tap-to-pay payments on iOS devices. The report also asserts that, while Google’s Android system does not now have the same policy, “this policy could change in the future.”
The report further contends that restrictions on the use of tap-to-pay “reduce consumer choice and inhibit progress toward a more robust open banking ecosystem, where consumers have more control over their personal financial information and developers provide payments solutions that better meet consumers’ needs.”