For years, Big Tech has been edging in on financial services, largely without the regulatory constraints befitting a bank or credit union, despite operating similar services.
But that may all come to an end soon if the CFPB’s latest proposal comes to pass.
Yesterday, the CFPB proposed supervision of “larger nonbank companies that offer services like digital wallets and payment apps.”
The rule also encompasses large fintechs like PayPal and CashApp, in fact, any tech company that handles more than five million transactions per year. A relatively small number when you consider PayPal processed around six billion transactions in one quarter this year.
So basically, most larger payment fintechs and wallet providers, as well as Big Tech, will be affected by these rules.
The aim is to “promote fair competition,” as usual, and speaks to the growing impact Big Tech and fintech have had on payments systems.
Apparently, the rules are a response to the increased usage of digital wallets and payment providers, as well as the rising amounts of associated complaints.
But not everyone is convinced. Chairman Patrick McHenry has deemed it a “step in the wrong direction,” while others believe it to be the product of incumbent pressure on the regulators to make it “a level playing field” on the regulatory front.
What is clear is that the proposal has raised more questions than answers – I’m looking forward to reading the comments the CFPB receives as a result (which close on January 8, 2024).
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A proposed rule would subject Google, Apple, PayPal and other digital wallet providers to the same scrutiny that banks face.
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