US watchdog proposes oversight of digital wallets, payment apps

By Ovunc Kutlu

ISTANBUL (AA) - The Consumer Financial Protection Bureau (CFPB) in the US announced Tuesday it is proposing supervision of larger non-bank companies that offer services of digital wallets and payment applications.

The watchdog said digital apps have a share of the e-commerce payment volume that is similar to or greater than traditional payment methods, such as credit cards and debit cards, while they have also gained a significant volume of in-person retail spending.

It added that big tech and other companies operating in consumer finance markets blur the traditional lines that have separated banking and payments from commercial activities, and emphasized that complaints about applications and the companies that run them have been rising in recent years.

Digital payment apps and wallets continue to grow in popularity, driven largely by big tech companies, but many of the firms are not subject to CFPB supervisory examinations, the watchdog said in a statement.

The proposal aims to ensure that non-bank financial companies that handle more than 5 million transactions per year follow the same rules as large banks, credit unions and other financial institutions already supervised by the CFPB, it added.

"Payment systems are critical infrastructure for our economy. These activities used to be conducted almost exclusively by supervised banks,” CFPB Director Rohit Chopra said in the statement. "Today's rule would crack down on one avenue for regulatory arbitrage by ensuring large technology firms and other nonbank payments companies are subjected to appropriate oversight."