Digital wallets: Big Tech under investigation in U.K. amid ‘seismic shift’ in consumer behavior

Two U.K. regulatory bodies have announced a joint investigation into the benefits and risks of digital wallets, including Apple Pay, Google Pay, and PayPal. It’s likely that more than half of UK adults now use one. The authorities are particularly interested in understanding how digital wallets impact consumers’ choice of payment options at checkout and how digital wallets may impact competition in the supply of financial services and the operational resilience and systemic safety of the UK financial services sector.

The Payments Systems Regulator (PSR) and Financial Conduct Authority (FCA) are seeking views on the benefits and risks digital wallets bring to people and businesses, according to the press release.

The use of digital wallets has grown rapidly over the last few years, and it’s likely that more than half of UK adults now use one. With Apple Pay, Google Pay and PayPal being three of the most widely used digital wallets in the UK today, digital wallets have become an increasingly important touchpoint between big tech firms and UK consumers.

The regulators are therefore keen to better understand the impact on consumers and businesses that digital wallets’ increasing popularity creates, including: 

. the range of benefits that digital wallets bring for service users

. whether there are any features that mean payments don’t work as well as they could for consumers and/or businesses

. their role in unlocking the potential of account-to-account payments and how they could impact competition between payment systems; and 

. whether digital wallets could raise any significant competition, consumer protection or market integrity issues, either now or in the future. 

David Geale – the PSR’s Managing Director said: 

„Digital wallets are steadily becoming a go-to payment type and while this presents exciting opportunities, there might be risks too. Collaboration between regulators and working with industry is crucial to ensure we’re on the front foot to support innovation and competition, making sure everyone benefits from access, protection and choice in payments. We look forward to hearing views and evidence from a wide range of stakeholders throughout this process.”

Nikhil Rathi – the FCA’s Chief Executive, said:

„The UK is seeing a seismic shift in how people pay, as digital wallets become a part of everyday life for many people. We want to make sure we can maximise the opportunities and benefits for consumers and businesses while protecting against any risks this technology may present.„

The regulators will analyse all responses received and provide an update by Q1 2025. 

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1. This publication builds on the PSR’s previous work on contactless mobile payments and the FCA’s work on big tech activity in financial services.
2. The PSR is particularly interested in understanding how digital wallets impact consumers’ choice of payment options at checkout. It hopes to gain better understanding of the implications of digital wallets’ growing role in payments, and the implications for competition between payment systems including the PSR’s strategic objective of unlocking the potential of account-to-account payments.
3. The FCA’s regulatory remit gives it a particular interest in issues such as how digital wallets may impact competition in the supply of financial services and the operational resilience and systemic safety of the UK financial services sector.
4. There has been a significant amount of interest on this issue internationally, including by the European Commission and the US Department of Justice.
5. In the UK, the Digital Markets, Competition and Consumers (DMCC) Bill was passed by Parliament on 23 May. The Bill introduces significant reforms to the UK’s consumer, digital markets, and competition regimes. The CMA’s Digital Markets Unit (DMU) will be granted powers to enforce a new regulatory regime for firms in digital markets that have ‘strategic market status’. The issues we examine in this report may be relevant to the work of the CMA. We will continue to liaise closely with the CMA on this topic. 
6. This call for information is open until 5pm on Friday 13 September. The regulators are interested in hearing from stakeholders across the payments and wider financial services landscape, including digital wallet and technology providers as well as their service users and other parties with an interest in digital wallets. The regulators will consider all feedback received and provide an update by Q1 2025.