Big Tech and Digital Wallets: Next Steps from the FCA and PSR Feedback Statement

The Financial Conduct Authority (FCA) and the Payment Systems Regulator PSR) have released their latest Feedback Statement (FS25/1) on Big Tech and digital wallets. This comprehensive document consolidates feedback received from stakeholders following their July 2024 Call for Information (CFI). It highlights the rapid adoption of digital wallets in the UK, opportunities for innovation, and regulatory challenges. Importantly, it outlines the next steps and regulatory focus areas for the industry.

The purpose of the FS25/1 document is to assess the evolving landscape of digital wallets, the role of Big Tech in this space, and potential regulatory responses. Given the rapid rise in digital wallet usage, from just 8 percent of card transactions in 2019 to 29 percent in 2023, the FCA and PSR are taking a proactive approach in evaluating competition concerns, identifying consumer protection and security risks, supporting innovation while ensuring a level playing field for smaller market entrants, and aligning UK regulations with international trends. The overall goal is to create a balanced approach that fosters competition, protects consumers, and promotes technological advancement.

Stakeholders across the financial ecosystem, including banks, fintechs, retailers, and consumer advocacy groups, have provided insights into the benefits and challenges of digital wallets. Several key concerns have emerged. One of the most pressing issues is competition. Apple has historically restricted access to Near-Field Communication (NFC) technology for third-party digital wallets, limiting competition. Additionally, Google and Apple benefit from their control over mobile ecosystems, which may steer consumers towards their own wallets rather than allowing fair competition. Another significant issue is the limited integration of alternative payment methods beyond traditional card-based transactions.

Consumer protection and security risks have also been raised as growing concerns. Increased reliance on digital wallets raises operational resilience issues. If a digital wallet service experiences a failure, users may be left unable to make transactions, posing a major risk to financial accessibility. Fraud risks are also becoming more prevalent, with unauthorised transactions and social engineering scams targeting users. A further complication is the ambiguity regarding liability for fraud, as issuers remain responsible for unauthorised transactions while wallet providers control authentication processes.

Another major challenge is the lack of integration for alternative payment methods. Most digital wallets currently support only card-based transactions, limiting the potential for account-to-account (A2A) payments, stablecoins, or even a future digital pound. Some stakeholders have pointed to the EMV standard, which governs point-of-sale (POS) payments, as a barrier to broader payment method adoption. Additionally, there is growing debate on whether pass-through digital wallets, such as Apple Pay and Google Pay, should fall within the FCA’s regulatory oversight to ensure consumer protection and market fairness.

In response to these concerns, the FCA and PSR have outlined their next steps. They will work closely with the Competition and Markets Authority (CMA) as it investigates digital wallets within Apple and Google’s mobile ecosystems. The CMA will assess whether these companies’ control over NFC access, app store policies, and default digital wallet settings create unfair market conditions. The statutory deadline for the CMA’s findings is set for October 2025.

The regulators will also continue monitoring barriers to A2A payments and stablecoin adoption. Efforts will be made to work alongside HM Treasury (HMT) to review how digital wallets fit into the UK’s Payment Services and Electronic Money Regulations. Enhancing fraud prevention measures is another major priority, with plans to engage with digital wallet providers and financial institutions to strengthen security protocols and investigate liability models. The National Payments Vision (NPV) will serve as a guiding framework for improving digital identity verification and authentication standards.

By the end of 2025, several outcomes are anticipated. Greater clarity on competition rules for digital wallets is expected, particularly regarding Apple and Google’s market dominance. There will be increased regulatory oversight on fraud prevention and consumer protection within digital wallet ecosystems. Innovation is also likely to accelerate as alternative payment systems become more integrated into digital wallets. Regulatory adjustments may be implemented to ensure fair market conditions, and continued collaboration between regulators, fintech firms, and financial institutions will shape the future of digital payments.

The rapid rise of digital wallets presents both opportunities and challenges. While they offer enhanced convenience and security, their increasing dominance by a few major players raises concerns about competition, consumer protection, and market fairness. The FCA and PSR’s latest report ensures that policymakers and industry leaders remain engaged in shaping a fair, innovative, and secure digital payments ecosystem. The coming year will be crucial in determining whether the UK’s digital payments market evolves into a more competitive and inclusive space or remains concentrated among a few dominant firms. Keeping track of these developments will be essential for businesses and consumers alike as digital payments continue to transform the financial landscape.