UK wants to take a closer look at the digital wallet market

The Payments Systems Regulator (PSR) and Financial Conduct Authority (FCA) are seeking views on a range of issues connected to the fast-growing digital wallets space. But although the pair were careful to point out that they want to know about the range of benefits the technology provides to users, most eyes will be on the competition element; we are talking about big tech here, after all.

"It's likely that more than half of UK adults now use one," the PSR and FCA said, of digital wallets, before going on to namecheck the big guns in the market: Apple Pay, Google Pay and PayPal.

They described digital wallets as "an increasingly important touchpoint" between big tech and UK consumers, and as such they want to be better understand their impact on consumers and business as usage becomes more widespread.

The implication is that the regulators are examining both positive impacts and the potential negatives association with digital wallets. They shared four bullet points to outline the focus of their probe (see image). But with Apple having just settled an antitrust case with the European Union over its Apple Pay service, the competition element is certainly the most interesting.

In a nutshell, Apple offered a series of commitments to the European Commission, including a pledge to give access to NFC functionality to third-party mobile wallets and allow iPhone users to set an alternative to Apple Pay as their default wallet, to settle a four-year case in which it was found to have illegally restricted competition in the market. A second case linked to online restrictions by Apple Pay was also settled at EU level, and simultaneously brought to a close proceedings related to Apple's conduct in the UK.

Nonetheless, the UK is clearly keen to keep big tech in check and make sure the market for digital wallets is functional and competitive.

"Digital wallets are steadily becoming a go-to payment type and while this presents exciting opportunities, there might be risks too," said David Geale, Managing Director of the PSR, in a statement. "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."

Choice is the key word there. The EU case was arguably all about choice and the small print to today's UK announcement explains that the PSR's main focus in this new fact-finding mission is to understand 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," the statement from the regulators reads.

For its part, the FCA says it has a particular interest in 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.

"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," said FCA Chief Executive Nikhil Rathi.

The PSR and FCA are looking for views from a wide range of stakeholders. They have committed to analysing responses and providing an update by the first quarter of next year.