The House Task Force on Financial Technology conducted a recent hearing entitled, “What’s in Your Digital Wallet? A Review of Recent Trends in Mobile Banking and Payments” to examine the current landscape of digital wallets and their impact on users. Witnesses providing testimony before the Committee included Raúl Carrillo, Associate Research Scholar, Yale Law School; Deputy Director, Law and Political Economy Project; Mishi Choudhary, Legal Director, Software Freedom Law Center; Renita Marcellin, Senior Policy Analyst, Americans for Financial Reform; Kia McAllister-Young, Director, America Saves, Consumer Federation of America and Scott Talbott, Senior Vice President of Government Affairs, Electronic Transactions Association.
According to the Committee report, digital wallets have increasingly become part of the payments ecosystem, with large technology companies growing their payments offerings, and alternative payment services such as PayPal, Block and Zelle being adopted by millions of consumers. Important policy questions about the payments system include the need for real-time payments, privacy, cybersecurity, consumer protection, and financial inclusion. Digital wallets are increasingly used to transact digital assets, offering ownership of, access to, and transactions with cryptocurrencies and stablecoins. According to a report cited by the Committee the global mobile wallet market has reached a value of $120 billion in 2021, with 70 million Venmo customers and 44 million users of the Cash App.
Regulatory oversight of digital wallets is shared by multiple state and federal regulators, and consumer protections for users are secured in Regulation E of the Electronic Fund Transfer Act (EFTA) and the Gramm-Leach-Bliley Act (GLBA). Members of the Committee raised concerns about third-party access to consumer data, who owns the data, and whether it can be monetized. The Committee reports that consumers may not be aware that digital wallets and financial apps do not have the same protections as financial products at a financial institution and some payment apps have been criticized for being unable to undo fraudulent transactions. From a consumer protection standpoint, the law remains unsettled in cases of fraud. The Committee will consider the “Protecting Consumers from Payment Scams Act” to settle regulatory ambiguities and to incentivize resiliencies in digital commerce. The bill would update the EFTA to close gaps and clarify ambiguities when consumers are defrauded into sending money by covered payment apps. Additionally, the bill would protect consumers from liability when they are tricked into initiating a transfer and would end the EFTA’s exemption for bank wire transfers.