On October 21, 2021, the CFPB sent orders to Amazon, Apple, Facebook, Google, PayPal, and Square requiring them to provide information about their current and planned payments products, practices, and data collection and monetization. The CFPB’s inquiry will also involve studying Alipay and WeChatPay and how they have operated together with their associated Chinese “super apps.” Noting that these super apps dominate the markets in China for messaging, ecommerce, and payments, the CFPB stated that “in such a market, consumers have little choice but to use these apps and little market power to shape how their data is used.” While the CFPB acknowledged the benefits to be gained from innovation in faster and frictionless payment systems, it justified its inquiry into the payments practices of big tech companies by expressing concern that payments solutions brought to market by large tech companies, with their scale, market power, and network effects, could stifle competition in payment options and lead to consumer experiences around use of their data and complaint handling that do not align with consumer expectations.

In its statement regarding the big tech inquiry, the CFPB focused specifically on the following concerns: (1) whether the big tech’s payments initiatives will involve “invasive financial surveillance” and combine data about consumer spending with geolocation data and browsing data and use this data to “deepen behavioral advertising, engage in price discrimination, or sell [the data] to third parties,” (2) whether they will operate their payments businesses in a way that “interferes with fair, transparent, and competitive markets,” and (3) whether they will coerce small businesses to participate in their payment platforms or risk being hidden in product listings or search results or shut out of the marketplace platform altogether.  

The CFPB’s orders compel production of information about the following areas related to the big tech companies’ current and planned payments solutions:

• Description of existing and planned payments products – including consumer to consumer (C2C) and consumer to business (C2B) payments products, how they function and the revenues generated from them.
• Data harvesting – including  the type of data collected, whether it is personally identifiable, anonymized or aggregated, and whether use of the data will be limited to the payment product or if it will be used for other purposes.
• Data use and monetization – including whether data about consumers’ use of the payments products will be used to develop, sell or market other products or services and whether such consumer data is sold or shared with third parties.
• Targeted advertising and offers – including how data will be used to provide advertisers with consumer attributes and information about the revenues generated from targeted advertising and offers using those attributes.
• Access restrictions – including the onboarding processes for consumers and businesses who want to use the payments products, consumer and business eligibility criteria, and whether the big tech company has made or plans to make its payment solution the only method to pay for another product or service.
• Consumer protections – including how notices or consents are provided or obtained from consumers regarding collection and use of their data, complaint handling, and protections against fraud.

The CFPB stated that its inquiry will inform regulators and policymakers about the future of payments systems and commented that the inquiry could lead to rulemaking under Section 1033 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Section 1033 calls on the CFPB to issue regulations pursuant to which consumer financial services providers are required to make available to consumers information about the consumer’s use of the provider’s consumer financial product.

The CFPB also noted that the inquiry aligns with recent actions by the Federal Trade Commission scrutinizing the business practices of big tech companies. In fact the CFPB’s inquiry follows increased scrutiny of big tech companies by the FTC under its new chair, Lina Khan, particularly with respect to increased antitrust scrutiny. The CFPB’s current director, Rohit Chopra, shared time as a commissioner at the FTC alongside Ms. Khan, and both have been vocal critics of big tech companies while at the FTC. Ms. Khan issued a comment letter in support of the CFPB’s big tech payments inquiry. In her comment letter, she expressed concern about big tech’s ability to combine “hyper-granular data” including spending behavior, geolocation, social connections, and browser history to give big tech companies a competitive advantage over other firms that rely on the big tech companies’ platforms to host their services and apps, for online advertisements, and for ecommerce access to customers.

The CFPB followed its October 2021 inquiry into big tech’s plans for payment solutions with a blog post in December 2021 asking engineers, data scientists, and other technology workers to report potential violations of federal consumer financial laws using the CFPB’s whistleblower process. The blog post focused in particular on use of algorithmic or artificial intelligence in decisioning for access to financial services like loans. The CFPB noted that while AI has become a helpful tool for consumer financial markets, there is the risk of intentional or unintentional discrimination in an AI driven decision making process. The CFPB’s blog post directed tech workers to its whistleblower webpage and emphasized its improved process for whistleblowing.

The CFPB’s actions in October and December 2021, and the FTC’s support of and alignment with the CFPB around taking a critical look at big tech companies, demonstrates that the federal consumer protection regulators will continue to scrutinize the activities of the largest consumer facing technology companies and are also taking a keen interest in the payments ecosystem. It is hard to imagine that this increased regulatory scrutiny will dampen the appetite of big tech to continue to grow in the payments space as part of their efforts to provide consumers with frictionless experiences on their platforms. Given the critical focus of the federal regulators, however, the big tech companies and their partners in the payments space will want to carefully consider how their products operate and are presented to consumers.

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