by the Consumer Financial Protection Bureau

Apple and Google set regulations on “tap-to-pay” which can impact innovation and competition

The Consumer Financial Protection Bureau (CFPB) published a new issue spotlight highlighting the impacts of Big Tech companies’ policies and practices that govern tap-to-pay on mobile devices like smartphones and watches. Apple currently forbids banks and payment apps from accessing the tap-to-pay functionality on Apple iOS devices and imposes fees through Apple Pay. Google’s Android operating system does not currently have such a policy. The issue spotlight explains how regulations imposed by mobile operating systems can have a significant impact on innovation, consumer choice, and the growth of open and decentralized banking and payments in the U.S.

“Regulations imposed by Big Tech firms have a big impact on whether consumers and businesses can make payments using third-party apps,” said CFPB Director Rohit Chopra. “We are carefully evaluating Big Tech’s role in our banking and payments system.”

As of the second quarter of 2023, Apple’s iOS operating system was on 55 percent of smartphones shipped in the U.S., and Google’s Android operating system was on 45 percent of smartphones shipped. 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 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.

Today’s issue spotlight finds:

• Rapid growth of tap-to-pay usage: Consumers’ usage of tap-to-pay options in the U.S. has grown considerably in recent years, nearing an estimated $300 billion across Apple Pay, Samsung Pay, and Google Pay, with some analysts estimating that digital wallet tap-to-pay transactions will grow by over 150 percent by 2028. In 2021, there were an estimated 25 million Google Pay users and 16.3 million Samsung Pay users. An estimated 130 million people in the U.S. use an iPhone at least once per month, and three-fourths of them have activated Apple Pay. An estimated 55.8 million made an in-store payment using Apple Pay in April 2023, accounting for nearly half of iOS users.
• Dominant mobile operating systems impose different regulations on contactless payments: 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. While Google’s Android operating system does not currently restrict third-party payment app access to the NFC chip on Android devices, this policy could change in the future.
• Restrictive tap-to-pay practices may reduce consumer choice and hamper innovation: 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. For example, Apple’s current NFC policy prohibits directly integrating tap-to-pay functionality into existing banking applications and other payment apps (e.g., PayPal, Venmo, Cash App).

The spotlight is part of the CFPB’s broader effort to monitor the shift to open banking in the U.S., including trends in consumer payments and the introduction of multi-service super apps into this space.

Read today’s issue spotlight – Big Tech’s Role in Contactless Payments: Analysis of Mobile Device Operating Systems and Tap-to-Pay Practices.

Read Director Chopra’s remarks on mobile payments at the Federal Reserve Bank of Philadelphia’s Annual Fintech Conference.

The CFPB is undertaking a rulemaking required by Section 1033 of the Consumer Financial Protection Act to clarify consumers’ personal financial data rights. This proposal has the potential to accelerate a shift toward “open banking” in the United States. Interoperability across consumer financial products and services is a key pillar of open banking, which facilitates greater consumer choice and ease of switching between providers. The retail payments system is rapidly evolving and the CFPB is evaluating the existing landscape to understand how regulatory changes could complement, or disrupt, the transition to open banking.

Consumers can submit complaints about financial products and services by visiting the CFPB’s website or by calling (855) 411-CFPB (2372).