On September 7, the Consumer Financial Protection Bureau (CFPB) released an issue spotlight focusing on the role that mobile device operating systems play in determining consumer’s payment options. According to the CFPB, “[g]iven the continued shift toward the use of contactless payments on mobile devices like smartphones and wearables, there is now readily available technology for consumers to securely make [point-of-sale (POS)] payments through different apps and services … Any restrictions imposed by the dominant operating systems … will have an outsized effect on access to payments systems and may hinder the development of a truly open ecosystem.”

Key findings of the report include:

  • Consumers’ usage of tap-to-pay options in the U.S. has grown considerably in recent years, nearing an estimated $300 billion with some analysts estimating that digital wallet tap-to-pay transactions will grow by over 150% by 2028.
  • Dominant mobile operating systems impose different regulations on contactless payments. For example, some devices do not permit third-party payment apps to access the technology that is necessary to execute tap-to-pay contactless payments.
  • According to the CFPB, restrictions on the use of tap-to-pay reduce consumer choice and inhibit progress toward a more robust open banking ecosystem.
  • According to the CFPB, interoperability can generate substantial benefits for consumers by promoting choice and reducing barriers to entry for new firms. Policies that impose restrictions on competition and raise consumer switching costs must be carefully scrutinized.

As discussed here, the CFPB is currently undertaking a rulemaking under Section 1033 of the Consumer Financial Protection Act as part of the financial services industry’s movement toward “open banking.” According to the press release accompanying the release of the issue spotlight, “[i]nteroperability across consumer financial products and services is a key pillar of open banking, which facilitates greater consumer choice and ease of switching between providers. The retail payments system is rapidly evolving and the CFPB is evaluating the existing landscape to understand how regulatory changes could complement, or disrupt, the transition to open banking.” Moreover, the CFPB announced recently that it intends to promulgate a “larger participant” rule for consumer payments, which would give it another tool to address its priorities with respect to payments issues like those highlighted here. However, we can’t help but think that the CFPB’s comments on this issue look more like antitrust commentary, rather than the kind of consumer protection issue that the agency has jurisdiction over.

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Photo of Keith J. Barnett Keith J. Barnett

Keith’s experience representing clients in the financial services industry as a litigation, compliance, regulatory, investigations (internal and regulatory), and enforcement attorney spans 20 years. Keith represents clients against government regulators (CFPB, FTC, SEC, CFTC), industry regulators (FINRA), and private litigants in federal courts…

Keith’s experience representing clients in the financial services industry as a litigation, compliance, regulatory, investigations (internal and regulatory), and enforcement attorney spans 20 years. Keith represents clients against government regulators (CFPB, FTC, SEC, CFTC), industry regulators (FINRA), and private litigants in federal courts, state courts, and before arbitration and administrative law panels in the financial services industry.

Photo of Josh McBeain Josh McBeain

Josh focuses his practice on federal and state consumer and business lending and payments laws, including those that apply to credit cards, installment loans, lines of credit, and point-of-sale finance.

Photo of Carlin McCrory Carlin McCrory

A seasoned regulatory and compliance attorney, Carlin brings extensive experience representing financial institutions, fintechs, lenders, payment processors, neobanks, virtual currency companies, and mortgage servicers.

Photo of Ethan G. Ostroff Ethan G. Ostroff

Ethan Ostroff’s practice focuses on financial services litigation and consumer law compliance counseling. Ethan is part of the firm’s national practice representing consumer-facing companies of all types in defense of individual and class action claims and counseling them on compliance with federal and

Ethan Ostroff’s practice focuses on financial services litigation and consumer law compliance counseling. Ethan is part of the firm’s national practice representing consumer-facing companies of all types in defense of individual and class action claims and counseling them on compliance with federal and state laws.

Photo of Chris Willis Chris Willis

Chris is the co-leader of the Consumer Financial Services Regulatory practice at the firm. He advises financial services institutions facing state and federal government investigations and examinations, counseling them on compliance issues including UDAP/UDAAP, credit reporting, debt collection, and fair lending, and defending…

Chris is the co-leader of the Consumer Financial Services Regulatory practice at the firm. He advises financial services institutions facing state and federal government investigations and examinations, counseling them on compliance issues including UDAP/UDAAP, credit reporting, debt collection, and fair lending, and defending them in individual and class action lawsuits brought by consumers and enforcement actions brought by government agencies.