Sam Riordan, Executive Director of Banking & Payments at consultancy Capco, has shared comments on the PSR and FCA’s joint feedback statement on the usage and impact of digital wallets, released earlier this week on 19th February as follows:
“The feedback statement from the FCA and PSR on the usage and impact of digital wallets is the next big signal their adoption, and in turn regulation, is about to bring them in focus. The rapid increase in the use of digital wallets between 2019 and 2023 can’t be ignored and suggests we are seeing their mainstream adoption as a quick and easy payment method given the prevalence of e-commerce. Not only do wallets today offer enhanced security through multi-factor authentication, but they are also paving the way for innovation tomorrow, especially when it comes to tokenisation and digital assets.
“That said, digital wallets are not wholly without risks to the consumer, especially when it comes to fraud, cyber security and consumer protection. With the latest usage statistics showing that digital wallets made up 29% of card transactions in 2023, these are clearly not considerations that can be taken lightly, and it is important that the FCA and PSR’s review of the Payment Services and Electronic Money Regulations strikes the balance between protecting consumers and facilitating the next wave of innovation in payments.
“The focus on competition amongst the prevalent wallet providers is also notable, and it is vital that the CMA focus on understanding the true impact this is currently having on the sector and establish a regulatory environment that allows newer innovative players to thrive, as has been the case with Open Banking. The UK has been trailing China and India in the mass adoption of digital wallets, but with the strong UK regulatory environment, they have the potential to turbo-charge the UK’s digital economy. ”
