Digital wallets and big tech

Digital wallets attracted the attention of UK financial regulators in 2024 due to their increasing popularity, with further developments expected in early 2025.

One key area of regulatory focus is the potential implications of “Big Tech” operators such as Apple, PayPal and Google (which in some cases operate across both the hardware and software elements of digital wallets) holding a significant market share of users. Given the nascency of the technology, UK regulators are also interested in the broader potential benefits and consumer impact of digital wallets as a “go to” payment method.

Background

Last July, the Payment Systems Regulator (PSR) and Financial Conduct Authority (FCA) announced a joint Call For Information to better understand the impact of digital wallet technology on UK consumers and businesses, focusing on:

• the range of benefits digital wallets can bring for customers;
• whether any features of them hamper optimum operability across consumers and businesses;
• how they might help to unlock the potential of account-to-account payments;
• how they may impact competition between different payment systems; and
• whether they raise any competition, consumer protection or market integrity concerns.

The FCA had already (in April) published its own feedback statement following its Call For Input around the potential competition impact of “data asymmetry” between Big Tech firms and other providers across the Financial Services (FS) sector – seeking to understand and address potential competition and consumer concerns arising from the amounts of FS customer data collected and held by Big Tech operators. At the same time, they noted the longer-term aim of harnessing co-operation between regulators in respect of Big Tech activity in the digital wallet space, with the joint PSR / FCA Call For Information forming part of this strategy.

Next Steps

The PSR / FCA Call for Information closed in September 2024 and an update is expected in Q1 2025. While the future direction of travel is not yet clear, any regulatory developments around digital wallet technology in the UK FS sector will potentially impact a broad range of payments ecosystem participants, from Big Tech providers themselves to smaller operators (including fintechs and other players in the supply chain), as well as customers using the technology and established payment, card issuing and other FS providers.

How can TLT help

The popularity of digital wallet-based payment methods and related services looks set to continue, with any regulatory developments certain to play a key role in how participants look to leverage opportunities in this space.

TLT’s Payments team includes specialists covering the payments, FS regulatory, data privacy and competition law issues impacting digital wallets and is very well placed to advise business operators across the different levels of the digital wallets market in respect of any regulatory changes and their impact on contractual arrangements, operations and future strategy. If you would like to talk to us in more detail to discuss how we can help you, please do get in touch.

Contributor: Ed Jeffery

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at February 2025. Specific advice should be sought for specific cases. For more information see our terms and conditions.