The Financial Conduct Authority logo on a door at its offices in London
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Big Tech’s payments play has UK regulators in a double bind

Protocol Policy

Hello, and welcome to Protocol Policy! Today we look at the regulatory pickle that comes with Big Tech entering the payments space. Also, Apple wants to take its 30% cut from boosted social media post purchases, and the Musk-Twitter deal is expected to close Friday.

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With all the news coming out of the U.K. in recent days, you’d be forgiven for overlooking its latest probe into Big Tech. Yesterday the U.K. Financial Conduct Authority said it would solicit views on the potential competitive harms of Big Tech’s expansion into financial services. In a 61-page discussion paper, the financial regulator outlined its thinking on the matter, with scenarios exploring how Big Tech could impact the payments, deposits, consumer credit, and insurance industries.

When it comes to payments, the FCA thinks Big Tech competition could actually be a good thing. The paper argues that, in the short term, Big Tech could help consumers by challenging the dominance of Visa and Mastercard, which together make up virtually the entirety of the U.K.’s card payment market. The FCA pointed to the standoff between Amazon and Visa in 2022 as an example of this already happening: Fed up with Visa’s interchange fees, Amazon threatened to boycott the payment processor and ultimately used its market power to negotiate a new deal with undisclosed terms.

But most companies aren’t Amazon, and don’t have a large enough retail presence to negotiate toe-to-toe with Visa and Mastercard. Given how diverse their businesses are, it’s not clear how Big Tech will really make a splash in finance beyond its core strengths, like Meta helping process payments when an ad on Instagram results in a sale. The FCA imagines a few scenarios, none of which involve Big Tech trying to beat the payment processors at their own game.

  • In the first scenario, Big Tech uses its dominance in digital wallets to bargain over fees with payment processors and merchants. To see this in action, look no further than the PayPal-Amazon deal announced yesterday, which will allow customers to pay for Amazon purchases using their Venmo wallets — potentially cutting out Visa and Mastercard.
  • The second scenario involves more direct competition, with Big Tech facilitating payments via alternative interbank systems, possibly involving blockchain. Meta tried that with the Diem stablecoin it backed and its ambitious Novi wallet. Both projects are dead, and Meta seems burned out on blockchain, but another tech company could conceivably try it.
  • And the third scenario has Big Tech going after payment use cases that aren’t consumer to vendor. This is a smaller market that’s already competitive — think Venmo, Zelle, Apple Pay, Cash App, Meta Pay, etc.

Yet even with tech’s well-documented stumbles, the FCA worries about Big Tech becoming too dominant. The agency describes this competitive risk as Big Tech companies — most likely Apple and Google — becoming gatekeepers of in-person mobile transactions that would give them “the ability and incentive to exploit their market power.” The FCA also warns companies could “lock consumers in” and then place data restrictions on incumbent providers.

But this dominance depends on mobile wallets taking over — which is still far from guaranteed. Mobile wallets still only accounted for around 5.8% of in-store transactions in the second quarter of 2022, even as more than three in four U.S. retailers now accept Apple Pay. So Apple and Google are still a ways away from having the market positioning the FCA envisions. The agency argues that “while initial forms of entry may be hard to predict, once momentum builds, we might see significant market changes occur quickly.”

This waffling on the merits of Big Tech disruption points to a larger regulatory problem. Regulators often talk about not wanting to pick winners. But what if they already have, and an existing anticompetitive market gets replaced with a different anticompetitive market? In the case of card payments, two firms control virtually the entire sector today. This puts regulators in a pickle, where their efforts to block Big Tech from capturing a new market would mean protecting companies they already see as anticompetitive. We’re likely to see this play out in other realms, especially health care, where the incumbents don’t exactly come off as helpless victims of disruption either. Big Tech makes for big targets, but our problems clearly go much deeper.

— Hirsh Chitkara (email | twitter)

In Washington

The FTC is forcing Uber subsidiary Drizly to boost its security posture after a breach exposed the information of 2.5 million people. The order marks one of the first times the agency successfully made an executive personally responsible for the firm’s conduct.

The U.S. program to help fund broadband access for low-income Americans prompted ISPs to introduce “price hikes, service cuts and fraud risks,” The Washington Post reports.

Gigi Sohn’s nomination to the FCC is still stuck in limbo on its first birthday. POLITICO notes that the lame duck period after the midterms could theoretically give previously reluctant senators more leeway to vote for her — but only if Majority Leader Chuck Schumer sets aside valuable floor time for her.

The U.S. intelligence community will “make meaningful investments in automatic declassification” tech and other efforts to modernize the classification system, Director of National Intelligence Avril Haines said in a letter to Sens. Ron Wyden and Jerry Moran.


The news is out! Join the Financial Technology Association’s inaugural Fintech Summit: Shaping the Future of Finance, produced in partnership with Protocol. Taking place in Washington, D.C., on November 16th, the Summit will examine the most pressing issues in fintech.

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In the states

A Pennsylvania state legislator is poised to propose a bill that would require the registration of firms creating AI.

On Protocol

If you’ve ever wondered how to stop those surprise marketing emails from shops where you paid through Square, Protocol figured it out— and showed how the company seems to don a variety of legal labels to keep its system going.

A top AWS executive accused of discrimination and harassment is leaving the company.

Around the world

Former Uber executive whistleblower Mark MacGann urged the EU parliament to do more to protect gig workers amid proposals to make sure more of them earn minimum wage.

Rishi Sunak, the U.K.’s latest prime minister, tweeted his plans to “build a new international alliance of free nations to tackle Chinese cyber threats and share best practice in technology security.”

Meanwhile, Sunak’s father-in-law founded InfoSys — and it appears to have made the PM and his wife even richer than the late Queen Elizabeth II.

In the media, culture, and metaverse

Elon Musk has told his financial partners he plans to close the Twitter deal by week’s end, and even filed the requisite paperwork, according to reports. A Delaware judge had given Friday as the deadline.

Apple said it will start taking its usual 30% cut from boosted posts on social media, which had previously escaped the policy, despite extensive international regulatory scrutiny on its app store fees. The change is aimed squarely at escalating the company’s feud with Meta, but will also side-swipe dating apps. The company is also hiking the price of several subscriptions.

In data

$17,500: The amount Amazon donated to nine GOP election objectors after saying it was cutting them all off.

I am rubber, you are glue

The New York Times ran an article calling Elon Musk a “geopolitical chaos agent.” Musk, presently poised to be running Twitter, then tweeted that actually it’s the Gray Lady that’s the real “chaotic actor in global politics.” Take that!


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