Warning issued to anyone who pays for things using their mobile phone
A warning has been issued to anyone who uses their phone to pay for things.
In a report published by the Financial Conduct Authority (FCA) and the Payment Systems Regulator (PSR), the number of card payments made using “digital wallets” such as Apple Pay and Google Pay has more than tripled in the past few years. Due to this significant rise in usage, the FCA and PSR assessed the impact this technology could have on consumers, as well as the wide financial sector.
Overall, the total share of transactions in the UK made using digital cards on mobile phones and other devices increased from 8% in 2019 to 29% in 2023. The research also found that around 20% of cardholders used a digital wallet for more than 50% of their card transactions in 2023. However, the regulators warned that there were several potential “challenges” and risks related to the growing use of digital wallets.
The FCA and PSR – who first launched the research back in July last year – warned that people could become “more dependent” on digital wallets, which could leave them in difficulties. For example, if someone does not have backup options such as cash or physical cards or the technology fails, they may be unable to pay for a product or service they have already consumed or used. Alongside this, the regulator noted the heightened risk of theft from people’s accounts through stolen devices, warning that criminals have been adapting their tactics to get around security measures such as face and fingerprint ID.
There are also concerns over competition, amid market dominance by the likes of Apple and Google – particularly over allowing third party companies to operate digital wallets on other firms’ wearable tech, such as smart watches and rings.
On the competition concerns heard, the FCA and PSR say they have shared their findings with the Competition and Markets Authority (CMA), which is currently investigating both firms regarding their “mobile ecosystems.” The regulator noted that this – in turn – could expand the range of alternative payment methods on offer, giving consumers more choice.
Even with the warnings, the regulators said the use of the technology – if handled correctly – represented “a significant opportunity for innovation and growth”. In a statement published alongside the report, the FCA and PSR said: “We will continue to embrace digital improvements that benefit consumers. This includes progressing work on open banking and contactless payments to boost competition and enhance the UK’s growth and competitiveness. These efforts align with the National Payments Vision of a modern, resilient, and innovative payments landscape that supports the evolving needs of consumers and businesses.”
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