Amid industry concerns about the dominance of Big Tech in the provision of digital wallets, UK financial regulators say they will take a back seat and support the country's Competition and Markets Authority in its wider investigations into Apple and Google’s mobile ecosystems.
Last month, the CMA announced investigations into whether Apple and Google have strategic market status in their mobile ecosystems, including operating systems, app stores and mobile browsers. As part of this, the watchdog will look into how the two tech giants operate their respective mobile wallets.
Meanwhile, the Financial Conduct Authority and Payment Systems Regulator have been carrying out their own work looking into the rise of Big Tech in digital wallets.
The proportion of card transactions using a digital wallet increased from eight per cent in 2019 to 29% in 2023, with a higher proportion at instore terminals. In 2023, approximately 20% of card users used a digital wallet for over 50% of their card transactions, while around 10% used one for over 75% of their transactions.
Having issued a Call for Information on the subject in July, the two regulators have now published the feedback, highlighting several concerns from stakeholders.
In addition to raising Apple's historic restriction of access to their NFC technology, respondents noted that Apple and Google benefit from being able to control their own mobile ecosystem, enabling them to steer consumers to use their own digital wallets through pre-installation.
Stakeholders also noted the lack of competition between payment systems within wallets: the main pass-through wallets don’t currently offer a choice beyond cards, limiting the potential for account-to-account payments, or stablecoins or a future CBDC.
In a letter to the CMA, the FCA and PSR say: "The competition issues raised by stakeholders have strong linkages with the CMA’s mobile ecosystems work. While we have not drawn specific conclusions at this stage, we are clear that the competition issues and opportunities raised do require further consideration and investigation."
They continue: "We have carefully considered using the FCA and/or PSR’s powers to investigate these concerns. However, we believe the CMA, through its powers under the DMCC [Digital Markets, Competition and Consumers Bill] Act, is best positioned to investigate and if appropriate, impose conduct requirements."
On other issues that have emerged from the Call for Information, the FCA and PSR say they will work with HMT on concerns over operational resilience and consumer rights and protection.