Google, Apple, Venmo payment apps, digital wallets now subject to US regulators

The US Consumer Financial Protection Bureau (CFPB) has ruled that big tech payment apps and digital wallets, such as Apple Pay, Google Wallet, Venmo, and PayPal, will be subject to the same regulations as big banks and credit card companies.

The US consumer watchdog handed down its final ruling on the matter Thursday to the dismay of Silicon Valley leaders, many of whom argue the new regulations will stifle innovation and create unnecessary financial burdens in the start-up sector.

Still, the CFPB says regulatory governance is necessary due to the dramatic increase in the use and everyday reliance on general-use digital consumer payment applications in the US and beyond.

The new regulations will cover any “larger participant nonbank” facilitating an “annual covered consumer payment transaction volume of at least 50 million transactions,” in US dollars.

Today, the CFPB finalized a rule to supervise the largest nonbank companies offering digital funds transfer and payment wallet apps. https://t.co/dmogR7Liab

undefined consumerfinance.gov (@CFPB) November 21, 2024

The new rules will also help the watchdog promote compliance with US consumer financial law, detect and assess risks to consumers and the market, and ensure consistent enforcement of consumer financial laws between nonbanks, insured banks, and credit unions, promoting fair competition.

“Providers of consumer financial products and services through these digital applications help consumers to make a wide variety of consumer payment transactions, including payments to friends and family and payments for purchases of nonfinancial goods and services,” the CFPB said.

Consumer digital financial products and services include digital wallets, payment apps, funds transfer apps, peer-to-peer payment apps, person-to-person payment apps (P2P), and more recently the Buy Now Pay Later (BNPL) financial services offered through many payment apps and online merchants.

Most Americans regularly use digital payment apps

Market research cited in the 259-page CFPB ruling by the Pew Research Center shows that roughly three-quarters of Americans have used at least one of four well-known P2P payment apps, such as Cash App and Venmo.

Overall, statistics show nine out of ten Americans, or 89%, are now using digital payment apps, with 15% of digital wallet users leaving their homes regularly without a physical wallet, according to research by McKinsey & Co. posted on the ecom site Ecommerce Tips.

What’s more, the CPFB says that consumers are also using digital apps to store credit cards and other payment credentials to make purchases, both online and at in-store checkout machines.

Additionally, Growth is expected to continue in an upward trend worldwide as more nations adapt and younger generations consistently move towards a cashless society.

"Digital payments have gone from novelty to necessity and our oversight must reflect this reality," CFPB Director Rohit Chopra said in a statement.

The top three digital wallets in the US are listed as Paypal, Apple Pay, and Venmo, followed by Google and Samsung Pay, with more than one-third (36%) of Americans using PayPal and another 20% using Apple Pay as their primary digital wallets, statistics show.

Besides general-use digital consumer payment applications, digital transactions involving consumer financial products or services that also fall within the scope of the regulations include:

• Origination, brokerage, or servicing of consumer loans secured by real estate and related mortgage loan modification or foreclosure relief services.
• Private education loans.
• Payday loans.

First proposed in November 2023, the new CFBP regulations will become effective 30 days after publication in the federal register, the ruling states, which could take at least 12 months or longer.