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Tech giants are under new scrutiny in US for their handling of consumer payments data

Despite facilitating payments, big tech firms have mostly remained tight-lipped about their data collection and storage practices.

Tech giants like Apple, Google, and Amazon (among others) will have to furnish information on how they collect and use consumer payments data to the US Consumer Financial Protection Bureau (CFPB), according to a Reuters report. The consumer watchdog also said that it will be studying payment system practices of Chinese tech giants like Alipay and WeChat Pay.

“Big Tech companies are eagerly expanding their empires to gain greater control and insight into our spending habits,” Rohit Chopra, Director, CFPB, was quoted as saying. He added that there is no clarity on how these companies use their payment platforms. It is why the body seeks to protect consumers from privacy breaches, fraud, and antitrust violations. 

The announcement is a confirmation of the growing influence of big tech companies and the major role they play in the lives of consumers. The move may serve as a cue for Indian authorities to prepare for enquiries into big tech companies and their presence in India’s payments landscape. 

What are the details sought by the US consumer watchdog? 

The information sought by CFPB will revolve around how tech companies harvest and monetise payment data, Reuters reported. 

The CFPB has also asked for:

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  • Clarity on use of data to target specific consumer behaviors 
  • Policies that restrict merchants or other third parties which consumers can use
  • Consumer protections offered from privacy breaches, fraud and other errors.

The consumer body clarified that it does not have powers to oversee tech companies but it can monitor risks for consumers by ordering companies in the payments market to provide data. 

Big Tech in India’s payments ecosystem raises concerns

The Reserve Bank of India (RBI) had raised concerns around the involvement of big tech companies in financial services earlier in July in its biannual Financial Stability Report.

The report pointed out that there are at least three challenges from Big Tech:

  • They straddle many different (non-financial) lines of business with sometimes opaque, overarching governance structures.
  • They have the potential to become dominant players in financial services.
  • Big tech companies are generally able to overcome limits to scale in financial services provision by exploiting network effects.

It made the following suggestions to tackle the aforementioned concerns:

  • Central banks and financial regulators use a blend of activity and entity-based prudential regulation.
  • International cooperation

The RBI also hit pause on its plan to issue NUE (new umbrella entities) licenses which were sought by major players like Google, Facebook, and Amazon. The reason given was the issue of data security in the context of foreign companies.  

RBI deputy governor T Rabi Sankar stressed that the regulation of fintechs should be ‘entity’ based rather than ‘activity’ based, because of the involvement of Big Tech in the sector. He said this weeks after Google and Amazon announced their association in facilitating deposits as part of their payment systems. 

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