CFPB Analyzes Mobile Device Tap-To-Pay Market as Possible Precursor to New Regulation

On September 7, 2023, the Consumer Financial Protection Bureau (CFPB) published its analysis of how smartphone companies are affecting consumers’ use of so-called “tap-to-pay” technology – the wireless transfer of data over very short distances, used in financial transactions conducted at the point of sale.  Concluding that “tech companies are playing a powerful role in determining consumers’ payment options” via tap-to-pay on mobile devices, it promised that the CFPB would “take appropriate steps to ensure that Big Tech companies do not impede the development of open ecosystems for digital payments”.

Key findings in the analysis were:

  • Consumer use of tap-to-pay technology emerged in the U.S. in the 2010s, finding its way into mobile devices even before it became predominant in cards – the major U.S. credit card networks did not transition to embedded microchips until 2015, and did not roll out tap-to-pay functionality until 2018, but Google Wallet was announced in 2011, and Apple Pay in 2014.
  • Since then, tap-to-pay use has risen steadily in the U.S.  The data cited in the analysis estimated that in 2021, there were 25 million Google Pay users and 16.3 million Samsung Pay users in the U.S., and that roughly three fourths of the 130 million iPhone users in the U.S. had activated Apple Pay in 2022.  Cited estimates expect tap-to-pay transactions to increase over 150 percent by 2028.
  • Private sector companies set internal policies and enter into agreements that govern how their mobile operating systems may be used for contactless payments.  Specifically, Apple permits tap-to-pay only via its proprietary Apple Pay, while Google’s Android operating system does not restrict its use by third-party payment applications (e.g., PayPal, Venmo, Cash App).
  • Restrictions on tap-to-pay use can reduce consumer choice and inhibit the development of a robust open banking ecosystem in which consumers have more control over their personal financial information.

The analysis did not explicitly state an intention to regulate the use of tap-to-pay technology, but the press release publicizing it took pains to note the bureau’s ongoing efforts to both “monitor the shift to open banking in the U.S.” and make rules to “clarify consumers’ personal financial data rights.”  Indeed, in accordance with section 1033 of the Consumer Financial Protection Act, the CFPB has already begun the process of preparing rules to protect consumers’ control of their own financial data.  Given this, a fair inference is that the CFPB is studying the rapid growth of the tap-to-pay market with an eye toward future consumer protection regulation in that space.