WASHINGTON, DC – The Consumer Financial Protection Bureau (CFPB) has released a new issue spotlight highlighting the consequences of Big Tech companies’ policies and practices governing tap-to-pay on mobile devices such as smartphones and watches. Apple currently prohibits banks and payment apps from using Apple iOS devices’ tap-to-pay functionality and charges fees through Apple Pay. Such a policy does not currently exist in Google’s Android operating system. The issue spotlight explains how mobile operating system regulations can have a significant impact on innovation, consumer choice, and the growth of open and decentralized banking and payments in the United States.
“Regulations imposed by Big Tech firms have a big impact on whether consumers and businesses can make payments using third-party apps,” said Rohit Chopra, the director of the CFPB. “We are carefully evaluating Big Tech’s role in our banking and payments system.”
Apple’s iOS operating system was on 55 percent of smartphones shipped in the United States in the second quarter of 2023, while Google’s Android operating system was on 45 percent of smartphones shipped. Apple and Google establish guidelines for app developers’ ability to incorporate near field communication (NFC) technology into their apps, which is required to conduct tap-to-pay transactions. The dominance of these two operating systems in the market, combined with the increasing shift toward mobile device payments, highlights the critical role their policies and practices play in retail payments.
Tap-to-pay usage is rapidly increasing: Consumers’ use of tap-to-pay options in the United States has increased significantly in recent years, approaching $300 billion across Apple Pay, Samsung Pay, and Google Pay, with some analysts estimating that digital wallet tap-to-pay transactions will increase by more than 150 percent by 2028. There are expected to be 25 million Google Pay users and 16.3 million Samsung Pay users in 2021. An estimated 130 million people in the United States use an iPhone at least once per month, with three-fourths of them using Apple Pay. In April 2023, an estimated 55.8 million people used Apple Pay in-store, accounting for nearly half of all iOS users.
Contactless payments are governed differently by dominant mobile operating systems: Third-party payment apps cannot access the NFC technology required to perform tap-to-pay contactless payments on Apple’s iPhone and other iOS devices. Apple Pay, Apple’s proprietary payment app, is the only option for tap-to-pay payments on iOS devices. While Google’s Android operating system does not currently restrict third-party payment app access to Android devices’ NFC chips, this policy may change in the future.
Consumer choice may be reduced and innovation may be hampered by restrictive tap-to-pay practices: Restrictions on tap-to-pay use limit consumer choice and impede progress toward a more robust open banking ecosystem in which consumers have more control over their personal financial information and developers provide payment solutions that better meet consumers’ needs. Apple’s current NFC policy, for example, prohibits directly integrating tap-to-pay functionality into existing banking and payment apps (e.g., PayPal, Venmo, Cash App).
To clarify consumers’ personal financial data rights, the CFPB is conducting rulemaking as required by Section 1033 of the Consumer Financial Protection Act. This proposal could hasten the transition to “open banking” in the United States. Interoperability across consumer financial products and services is a key pillar of open banking, allowing consumers to have more options and switch between providers more easily. The retail payments system is rapidly evolving, and the CFPB is assessing the current landscape to determine how regulatory changes may supplement or disrupt the transition to open banking.
The Consumer Financial Protection Bureau is a 21st-century agency that implements and enforces Federal consumer financial law and ensures fair, transparent, and competitive markets for consumer financial products. Visit consumerfinance.gov for more information.Almost every development we cover on Our World in Data is supported by some kind of technological advancement.