Will Big Tech's Payment  Oversight Tighten Payments?

Regulatory uncertainty looms over Big Tech payment apps as the CFPB's new oversight rule faces challenges amid leadership changes and political debate over the agency’s future.

Welcome to Today in Payments.
I’m your host, Patti Murphy, here with your daily dose of payments notes.

Regulating Big Tech in Payments

The back-and-forth in Washington over the Consumer Financial Protection Bureau (CFPB) has implications for the payments space that probably not too many people have given much thought to. I’m talking about the regulation of Big Tech companies that have their hands in payments—think Apple, Amazon, Google, PayPal, and X.

The CFPB’s New Rule on Digital Payment Apps

Last November, the CFPB finalized a rule that would put nonbanks offering digital payment apps on an equal regulatory footing with large financial services firms that already were being regulated by the consumer watchdog agency. Under the rule, which had an effective date of January 9, any tech company processing at least 50 million person-to-person payment transactions a year would be subject to CFPB oversight.

The Origins of the CFPB

Back in 2010, the folks writing the Dodd-Frank Act thought it would be a good idea to centralize into one agency the oversight of large organizations involved in consumer financial services. So, they created the Consumer Financial Protection Bureau to do just that.

The reasoning seemed pretty sound since, at the time, there were about a half-dozen different regulators with their fingers in the regulatory pie, and there wasn’t a lot of coordination around the regulation of these companies. The feeling was that the lack of focus on oversight of large consumer financial services providers was a contributing factor to the 2008 financial crisis—and that inconsistent enforcement of consumer protection laws led to a lot of the problems that created the crisis.

Big Tech’s Expansion into Payments

Since then, however, Big Tech has entered the scene, with payment apps like Venmo and Cash App competing against bank-owned apps like Zelle. And more recently, X, the social media platform previously known as Twitter, announced it would get into the business as well.

In January, X announced a deal with Visa that would allow X users to move funds between their traditional bank accounts and their X digital wallets to make P2P payments in real time. However, no start date has been announced yet for the new X Payments initiative.

Regulatory Uncertainty and CFPB Shutdown Concerns

The move to regulate Big Tech payment apps was thrown into uncertainty when, in February, workers at the CFPB were told to stop working on the projects they had been assigned to—presumably including oversight of Big Tech payment apps. At the same time, the doors of the CFPB headquarters building were shut and locked.

Some speculated that the CFPB was shuttered to weaken rules like the regulation of Big Tech payment apps. But now, that’s not so clear.

New Leadership and the Future of CFPB Oversight

In a legal brief recently filed in U.S. District Court for the District of Columbia, the Trump administration stated it wasn’t shutting down the CFPB. Instead, the President had named a new director to the bureau—Jonathan McKernan—to replace Rohit Chopra, who resigned when President Trump took office. McKernan is currently a member of the Federal Deposit Insurance Corporation board.

“The CFPB leadership remains committed to having CFPB perform its statutory obligations,” the Trump administration wrote in its brief.

What’s Next for Big Tech Payment Oversight?

Does that mean the Big Tech payment oversight rule still has teeth? That remains to be seen. Watch this space.