The U.S. consumer watchdog, not usually known to side with Wall Street lenders, has handed them a rare win by cracking down on Big Tech companies that are increasingly encroaching on banking turf.
I really don’t understand what the CFPB is aiming for here, and the prominence of Apple Pay and Google Pay in articles about it seems particularly misplaced.
Seventeen companies would be affected including Apple, Google, PayPal (PYPL.O) and Block’s (SQ.N) CashApp, which together facilitated roughly $1.7 trillion worth of payments in 2021, the CFPB said.
It sounds like they’re including tapping your debit/credit card using your phone in these numbers, but this makes no sense. If I use Apple Pay to pay a merchant with my, for example, Chase card, Apple doesn’t even process the transaction; the merchant is still directly charging my Chase card. We’re not missing any degree of regulation here; it’s still the same bank. The privacy angle is particularly weird. The CFPB already knows that Apple has no idea what I bought; meanwhile Chase and Visa are monetizing the hell out of that transaction data.
The CFPB already supervises PayPal and CashApp under its international money transfer rules, but Apple and Google would be subject to CFPB oversight for the first time. Google declined to comment and Apple did not respond to a request for comment.
Apple Cash, the service for transferring money to people you personally know, is available only in the US. There are no international transfers. The money, meanwhile, is stored in Green Dot Bank, which is already regulated. All of these services store your money in real banks.
“Silicon Valley is already a major part of the financial marketplace,” the CFPB said in a statement. Subjecting large tech companies in the payments market to similar oversight as banks will increase competition, the agency said.
But the money is in banks and is already subject to oversight.
Without regulatory scrutiny, they could leverage their growing dominance of consumer payments to capture other services like lending and card issuing, analysts said.
This part is just ridiculous. Only banks issue cards. If they want to get into issuing cards, they need to buy or create a legal bank, which would then be regulated like every other bank. You don’t regulate a non-bank on the false assumption that it would magically start doing something only banks can do.
Worried by this trend, the banking industry has been lobbying financial regulators to crack down on tech giants, arguing in public letters, blogs and congressional testimony that they are putting consumers’ privacy at risk.
At one point google did have a service with a physical card and since they were essentially a cash app where you had a digital wallet of funds held by google in app (they way you would if you were paid via paypal etc), they were in fact issuing cards and holding consumer money similarly to a bank. That trend didn’t pan out for google, but, my understanding is that Apple has a similar service now (Though it’s actually a credit card backed by Goldman Sachs).
I’m not disputing your points which I believe are valid. That money had to be transferred from a bank to paypal or google or apple, but in all cases a bank transaction was included and therefore oversight from the CFPB. I do wonder if this is a preventative measure given the rise in cash apps and fraud using them.
At one point google did have a service with a physical card and since they were essentially a cash app where you had a digital wallet of funds held by google in app (they way you would if you were paid via paypal etc), they were in fact issuing cards and holding consumer money similarly to a bank.
I don’t recall the specific partner(s) off the top of my head but Google itself never issued cards or held customer deposits. Actual banks did.
I really don’t understand what the CFPB is aiming for here, and the prominence of Apple Pay and Google Pay in articles about it seems particularly misplaced.
It sounds like they’re including tapping your debit/credit card using your phone in these numbers, but this makes no sense. If I use Apple Pay to pay a merchant with my, for example, Chase card, Apple doesn’t even process the transaction; the merchant is still directly charging my Chase card. We’re not missing any degree of regulation here; it’s still the same bank. The privacy angle is particularly weird. The CFPB already knows that Apple has no idea what I bought; meanwhile Chase and Visa are monetizing the hell out of that transaction data.
Apple Cash, the service for transferring money to people you personally know, is available only in the US. There are no international transfers. The money, meanwhile, is stored in Green Dot Bank, which is already regulated. All of these services store your money in real banks.
But the money is in banks and is already subject to oversight.
This part is just ridiculous. Only banks issue cards. If they want to get into issuing cards, they need to buy or create a legal bank, which would then be regulated like every other bank. You don’t regulate a non-bank on the false assumption that it would magically start doing something only banks can do.
This part is just too rich.
At one point google did have a service with a physical card and since they were essentially a cash app where you had a digital wallet of funds held by google in app (they way you would if you were paid via paypal etc), they were in fact issuing cards and holding consumer money similarly to a bank. That trend didn’t pan out for google, but, my understanding is that Apple has a similar service now (Though it’s actually a credit card backed by Goldman Sachs).
I’m not disputing your points which I believe are valid. That money had to be transferred from a bank to paypal or google or apple, but in all cases a bank transaction was included and therefore oversight from the CFPB. I do wonder if this is a preventative measure given the rise in cash apps and fraud using them.
I don’t recall the specific partner(s) off the top of my head but Google itself never issued cards or held customer deposits. Actual banks did.
Thank you! It’s been a long time in tech years and I couldn’t remember the details.