Digital wallets and big tech - June 2025 update

Further to our recent update, the Payment Systems Regulator (PSR) and Financial Conduct Authority (FCA) have published a Feedback Statement (FS25/1) following their joint Call For Information to gather input on the risks and opportunities presented by the increased use and popularity of digital wallets and the role of “Big Tech” operators in the market.

Alongside the Feedback Statement the regulators have published a letter to the Competition and Markets Authority (CMA) welcoming the CMA’s Invitation to Comment on its investigations in relation to Apple and Google’s mobile ecosystems under the recently introduced Digital Markets Competition and Consumers (DMCC) Act 2024.

Key takeaways and next steps

Stakeholder feedback to the PSR’s and FCA’s Call For Information was broadly positive, with a majority viewing digital wallets as offering significant innovation and growth opportunities (including beyond payments into wider financial services and digital identity use cases). Respondents also highlighted the potential increased role of digital wallets in supporting non-card payment methods in order to drive greater consumer options and competition.

However, the following potential areas of concern were highlighted, which the PSR and FCA intend to address through wider stakeholder and regulatory engagement: 

• Barriers to competition between digital wallets - Apple and Google operate across the entire mobile payment technology ecosystem, offering hardware, software and “pass through” digital wallets (digital wallets which do not hold funds but enable users to make payments via a card) so are perceived to have a large degree of control and influence.  There are also concerns that restricted third party access to functionality offered by Apple’s proprietary NFC (near field communication) chip used in its iOS operating system has fettered innovation and competition – the regulators acknowledge such access has widened in the last 18 months but say it’s too early to judge the tangible impact.

To address these points, the FCA and PSR will work closely with the CMA as part of the latter’s recently announced “Strategic market status investigations” into Apple and Google’s respective mobile ecosystems, which have decision deadlines of October 2025.

• Barriers to competition between payment systems within digital wallets - The main pass-through digital wallets still rely upon card-based payments. To help prevent further card scheme dominance within the UK retail payments market, alternative payment methods such as A2A (account to account) payments or even a CBDC (central bank digital currency) could potentially be scaled as viable alternative use cases for digital wallets.

The FCA and PSR recognise the importance of the CMA’s investigation referenced above and will work alongside it to understand how any interventions to address competition between wallets could impact competition between payments systems within digital wallets.

• Potential impact on financial system resilience and consumer rights and protection - As individuals become increasingly reliant on digital wallets, the wider resilience risk arising from operational failure preventing users from making payments could (in theory) increase. Separately (although pass-through digital wallets are traditionally considered to be relatively secure) some stakeholders raised concerns around emerging fraud risks to consumers (especially in relation to “user-manipulation” types of fraud).

The FCA plans to engage with HM Treasury to consider these issues as part of the proposed review of the Payment Services Regulations and the Electronic Money Regulations (with HM Treasury controlling the timelines).

• Possible gaps in the current regulatory framework - While some stakeholders have suggested that certain potential risks (including in respect of fraud) could be mitigated by bringing the provision of digital wallets under the regulatory perimeter of the FCA, others argue that prescriptive measures could hinder innovation.

The regulatory direction of travel is further complicated by a potential lack of clarity as to who regulates certain actors across the digital wallet ecosystem. The Feedback Statement notes the FCA will seek to engage with HM Treasury as part of the proposed review mentioned above, and the PSR will continue to engage with digital wallet providers as part of monitoring developments in the digital wallets landscape – however as noted below the PSR will soon be consumed into the FCA.

What will happen next?

The key themes referenced in the Feedback Statement broadly align with the aims set out in the UK Government’s recently published National Payments Vision, including promoting innovation, encouraging competition and “de-cluttering” the regulatory landscape.

To that end, since publication of the Feedback Statement, the UK Government has announced the PSR will be phased out with their work consolidated into the FCA’s remit.  Although there are no immediate changes, the two bodies will work collaboratively in the interim to ensure a smooth transition.

Given the complexity and breadth of some of the issues raised and the scope overlap with other regulators, concrete developments on digital wallets are likely to take some time to crystallise – however the October 2025 decision under the CMA’s investigations into Apple and Google looks like a key milestone to keep on your radar.

How can TLT help?

As the popularity of digital wallet-based payments and related services looks set to continue, potential risks and opportunities continue to evolve – as will the regulatory approach. The way in which financial regulators and the CMA address these emerging issues will be relevant to a broad range of businesses as they look to explore and capitalise on emerging market 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 businesses operating across all levels of the digital wallet ecosystem, including in respect of any regulatory changes. If you would like to talk to us in more detail to discuss how we can help you, please do get in touch.

Written by Alex Williamson, with contributions by Ed Jeffery and Francesca Jack

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