On October 21, 2021, the United States Consumer Financial Protection Bureau (CFPB) –a regulatory agency that, among other things, implements and enforces federal consumer financial law – issued orders against six Big Tech companies requesting detailed information about their business practices in relation to payment systems they operate in the United States. According to CFPB’s official statement, the orders are intended to help the CFPB better understand how Big Tech companies exploit the data they collect through their payment platforms. They are notable in that they highlight not only the powerful consumer insights that can be gleaned from smarter, more data-rich payment systems, but also the changing risks that the use of that data may bring.
Specifically, the orders will compel these Big Tech companies to share information on the following:
Data harvesting and monetization
Payment companies may be actively sharing payments-related data across product lines and with data brokers and other third parties. Accordingly, the CFPB’s probe into data harvesting and monetization is designed to uncover (1) whether payment companies engage in invasive financial surveillance and combine the data they collect on consumers with their geolocation and browsing data, and (2) whether they in turn use this data to deepen behavioral advertising, engage in price discrimination, or sell to third parties. The CFPB’s stated concern is that current practices may not align with consumer expectations.
Access restrictions and user choice
As payment systems become widely adopted, there are concerns that the resulting powerful network effects could pressure merchants and other players into participation. Accordingly, the CFPB’s review of current access restrictions and user choice will inform its analysis of whether a payment platform engages in fair, transparent and competitive market practices. As part of its mandate, the CFPB will investigate whether payment platforms stifle innovation and take advantage of small businesses. Any current restrictive access policies and how those policies affect consumer and business choice may inform the CFPB’s determination.
Other consumer protections
Ultimately, the CFPB plays a part, along with the larger Federal Reserve system, in shaping the development of real-time payments in the United States. To that end, the CFPB will endeavor to ensure that new payment platforms ensure key consumer protections are in place (for example: responsive dispute resolution and complaint management systems).
What this means for Canadian payment companies
While Canada’s regulatory landscape differs from that of the United States, advances in real-time payments and retail payments regulation continue to move forward at a reasonable pace. The same themes including: advancing innovation, supporting competition, and ensuring appropriate consumer and data protection schemes are in place, will be considered in this country as well, particularly as advancements in open banking and the finalization of the Retail Payment Activities Act and supporting regulations continue.