Financial products and services regulatory company, the Consumer Financial Protection Bureau, in its first notable operation under a new director has ordered Apple, Amazon, PayPal and other tech giants to disclose how their proprietary payment networks function.
All payment systems created by big tech companies which include Apple Pay and Google Play now control large portions of e-commerce and person-to-person payments. In view of this, Consumer Financial Protection Bureau Director Rohit Chopra is inquiring more limpidity and more details about what consumer protections have been put in place.
Potential antitrust concerns were also raised by the CFPB, in a move that seeks transparency from the big tech guys.
“Big Tech companies are eagerly expanding their empires to gain greater control and insight into our spending habits,” Rohit Chopra said in a prepared statement.
Chopra, who was a commissioner on the Federal Trade Commission where he used his role to raise concerns about anticompetitive behaviour at large technology firms, before his confirmation as director last month, has also raised the issue during his confirmation hearing at the Senate Banking Committee.
A number of policies put in place by Trump administration has been repealed by the CFPB. While the bureau is also adding staff in anticipation of taking a more active role in regulation and enforcement, as it was during the Obama administration.
Full-featured payment systems and networks which are often planted into smart devices such as Apple Pay, AliPay and Google Pay, have been deployed by technology companies in the past decade. Apple credit card product is being sold right inside the iPhone. It is automatically coordinated into the customer’s payment options once a consumer opens an account. In various ways, consumer’s smart phone has substituted their wallet.
Although the innovation has been celebrated to an extent by those who use it, banks and consumer groups have raised concerns about tech companies running their own independent payment networks. As long as banks have tried to compete with silicon Valley in payments through services like Zelle, it has been a struggle to keep up and do not have the coordinated systems Apple or Google operate that is seen a competitive advantage. Additional steps are required for consumers to add their credit or debit cards to their iPhone and Android devices.
“Since the Bureau was founded, a growing share of banking activity has occurred outside of the purview of leading regulators, putting consumers and the resiliency of financial systems at risk,” said Richard Hunt, CEO of the Consumer Bankers Association, the trade group for nation’s big consumer banks. How their products store consumer information, how the data is aggregated, sold or shared with other companies, as well as how consumers’ information may be uses to sell them additional products are the information’s the CFPB asked in its letter to companies.
The Electronic Transaction Association, which represents Apple, Amazon, Google and other tech companies in relation to payments, said they plan to fully cooperate with the CFPB’s order.
“The digital transactions industry has a good story to tell about its efforts to protect consumer data. We look forward to working with Director Chopra and the CFPB on this important effort,” said ETA CEO Jodie Kelley in a prepared statement.