UK Digital Wallet Competition: Apple and Google Under Scrutiny as Rivals Emerge

UK Digital Wallet Competition: Apple and Google Under Scrutiny as Rivals Emerge

In recent developments, the Competition and Markets Authority (CMA) has initiated investigations into Apple and Google to assess their strategic market status within their mobile ecosystems. This inquiry will delve into various aspects, including their operating systems, app stores, and mobile browsers, with a specific focus on the functioning of their mobile wallets.

Big Tech and Digital Wallets: Ongoing Investigations

Simultaneously, the Financial Conduct Authority (FCA) and the Payment Systems Regulator (PSR) are conducting their investigations regarding the increasing influence of Big Tech in the realm of digital wallets. This scrutiny comes in response to the significant rise in the use of digital wallets for card transactions.

Growth of Digital Wallet Usage

The data reveals a considerable shift in consumer behavior:

  • In 2019, only 8% of card transactions utilized a digital wallet.
  • This figure surged to 29% by 2023, particularly at in-store terminals.
  • Approximately 20% of card users reported using a digital wallet for more than 50% of their transactions.
  • About 10% of users employed a digital wallet for over 75% of their card transactions.

Regulatory Feedback and Concerns

Following a Call for Information issued in July, the FCA and PSR have published feedback from stakeholders, outlining several significant concerns:

  • The historic restriction of access to Apple’s NFC technology.
  • The dominance of Apple and Google in controlling their mobile ecosystems, which guides consumers towards their proprietary digital wallets through pre-installation.
  • A lack of competition among payment systems within digital wallets, limiting options to card-based transactions and hindering account-to-account payments, stablecoins, or future Central Bank Digital Currencies (CBDCs).
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Collaboration Between Regulators

In a recent letter to the CMA, the FCA and PSR stated, “The competition issues raised by stakeholders have strong linkages with the CMA’s mobile ecosystems work. While we have not drawn specific conclusions at this stage, we are clear that these issues necessitate further investigation.”

They further emphasized, “We have considered utilizing the FCA and/or PSR’s powers to address these concerns. However, we believe that the CMA, through its authority under the Digital Markets, Competition and Consumers Bill (DMCC), is best positioned to lead this investigation and impose necessary conduct requirements.”

Future Steps and Consumer Protection

In addition to the competitive landscape, the FCA and PSR indicated they would collaborate with Her Majesty’s Treasury (HMT) on issues related to operational resilience and consumer rights and protection.

As the landscape of digital wallets continues to evolve, the outcomes of these investigations may significantly impact consumer choices and the competitive dynamics within the mobile payments ecosystem.

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