UK Regulators Scrutiny Apple and Google Digital Wallets

The UK Financial Conduct Authority (FCA) and the UK Payment Systems Regulator (PSR) have engaged with the UK Competition and Markets Authority (CMA) on relevant potential competition issues of Google and Apple digital wallets highlighted in stakeholder responses to a joint PSR/FCA Call for Information (CFI) on big tech and digital wallets published in July 2024[1]. The Feedback Statement FS25/1[2] published on 19 February 2025 indicates that competition an innovation for digital wallets may not be working. Apple and Google are the two largest providers of ‘pass-through’ digital wallets in the UK and benefit from control of their ecosystems to steer customers to using their own wallets, e.g. through the pre-installation of the wallet on their devices.

Digital wallets are generally defined in the Feedback Statement, “Digital wallets are apps, software or online services that allow consumers to make payments using mobile phones or other electronic devices”. Two types of wallet have been discussed in the CFI and Feedback statement, ‘staged’ and ‘pass-through’.

Pass-through digital wallet: These include Apple and Google Pay wallets which allow users to make card payments but do not hold funds themselves, they instead rely on converting the payment card into a ‘token’ that securely links the card’s PAN to a virtual card on a consumer device. They often have contractual relationships with card issuers and card schemes.

Staged digital wallet: This includes other types of digital wallet, for example Paypal, which follows a two-stage process, where funds are added to the digital wallet as e-money and later, at the point of purchase, transferred from the payee’s digital wallet to the recipients digital wallet. These are sometimes referred to as e-wallets. They typical enter into contractual relationships with merchants similar to traditional acquirer models.

We discussed the types of digital wallets in more detail in our alert in August 2024 here. 

CMA investigation

The CMA have separately launched two Strategic Market Status (SMS) investigations[3] into Apple and Google’s mobile[JS1]  ecosystems, including operating systems, app stores and browsers that operate on mobile devices. Both tech-giants have significant ability to influence how consumers use their devices through their respective iOS and Android systems which can also support or impede how businesses and developers can innovate with content on the use of devices such as apps.

The extent of the investigation includes: 

• Competition between and within Apple’s and Google’s mobile ecosystems and what barriers may be preventing other competitors from offering rival products and services on Apple’s and Google’s platforms.
• Any leveraging of Apple’s and Google’s market power using their own operating systems, app distribution or browsers to favour their own apps and services.
• Potential exploitative conduct- whether Apple or Google are requiring app developers to sign up to unfair terms and conditions as a condition of distributing their apps on Apple’s and Google’s app stores.

What could happen after the CMA investigation?

Under the digital market’s competition regime, the CMA can designate firms with SMS in relation to a particular digital activity[JS2] . Once designated, the CMA can impose conduct requirements or propose pro-competition interventions to achieve positive outcomes for UK consumers and businesses. The CMA are gathering evidence from stakeholders, as well as from Apple and Google before reaching a decision by the end of October 2025.

PSR/FCA feedback findings

The FCA and PSR’s are focused on supporting growth and innovation and stakeholder feedback provided in FS25/1 has provided interesting points to consider should the Governments achieve ambitions for the future of UK payments as outlined in the National Payments Vision. For example, the work being done on the development of open banking and eventually open finance could lead to more competition by giving customers an alternative method of payment, stakeholders believe the work on digital wallets is an important aspect to achieving this.  Account-to-account (A2A) transfers, could also mean that consumers could benefit from instant settlement and potentially lower fees, promoting competition and innovation. Some digital wallets can connect directly to bank accounts and facilitate A2A transfers using regulated open banking payment methods. In addition, the UK is also exploring the design of a UK Central Bank Digital Currency (UK CBDC). Digital wallets would naturally play a role in facilitating a digital pound as well as stablecoins.

However, if the main ‘pass through’ to digital wallets remains cards this could be a barrier to the adoption of alternative means of payments mentioned above. Respondents to the CFI noted that consumers should be able to choose their method of payment and digital wallets should be able to process open banking payments both online and at POS terminals. 

Respondents also raised that generally Apple and Google have the ability to push users to use their pre-installed wallets which could dampen innovation by other digital wallet offerings. Third-party offerings do not have access to the mobile ecosystem in the same way for example by steering customers to their wallets with push notifications.

The CFI stakeholder responses bring up several potential issues for the CMA to investigate:

Competition concerns: the growing dominance of Apple and Google digital payments. Contactless payments and digital wallets have dramatically increased in the UK due the rapid adoption of digital wallets in the UK.

Innovation and Consumer Benefits: digital wallets present an opportunity for growth, increased choice in payment methods between and within wallets and has the potential to benefit consumers and merchants by increasing competition. 

Operational resilience, consumer protection and fraud: failures or disruption of wallets could affect consumers and merchants over time with the increasing reliance on digital wallets and therefore increase the risk of harm occurring. Some respondents also raised concerns about a potential diminishing responsibility of the wallet providers to strengthen security measures/ Strong Customer Authentication (SCA) and invest in tackling fraud as the wallet provider is not liable for the reimbursement of any loss from an unauthorised payment.

Apple and NFC access to digital wallets

This is not new ground for Apple with respect to them dealing with competition concerns with their digital wallets. Respondents the CFI also brought up concerns in relation to Apples historic restriction on access to the NFC chip which may have reduced competition between digital wallets and reduced choice. By way of summary, this related to Apple having  “closed” the NFC antenna on the iPhone so that only a card/token stored in the Apple Pay e-wallet on an iPhone was able to access the NFC antenna and therefore communicate with a contactless terminal, and so if an issuer wanted to offer this to its customers the possibility to make mobile contactless payments with their iPhone they would be required to enter into an agreement with Apple, the agreement included that the card issuer would pay a fee to Apple in relation to each payment taking place on the Apple wallet.

Until October 2024, Apple restricted access to the NFC chip in UK iPhones and other iOS devices to all digital wallet competitors, reserving this access for Apple Pay only. Apple also still charges a fee to issuers whereas Google Pay does not, stakeholders said this could restrict an issuers capacity to develop and offer competing wallet solutions. 

Stakeholders have also raised that Apple have committed to providing free access to the NFC chip on its devices for digital wallets, however in the UK, Apple charges for access.  In addition, Apple’s EU commitments are legally binding for 10 years however in the UK they are not, which could deter entry to the UK from other digital wallet providers.

See our previous article on the Apples scrutiny - Apple Pay under Competition Law scrutiny - Bird & Bird

Next steps

The PSR and the FCA will work with the CMA to address competition issues in digital wallets. The FCA and PSR are inputting into the CMA’s SMS investigation as the CMA is best placed under the Digital Markets, Competition and Consumers Act (DMCAA) to investigate concerns.

Based on feedback from the CFI the CMA will likely investigate:

• Lack of iOS NFC access – The FCA and PSR expect this could open access could encourage competition between digital wallets and improved innovation in digital wallets and new services and improve card issuers bargaining position in their contractual relationships.
• Apple and Google’s market position- This could address whether third party wallet providers could access other mobile features such as push notifications to steer customers to their wallets.

The FCA acknowledge the risks in relation to fraud and operational resilience raised by stakeholders which could be addressed by bringing pass-through digital wallets into the FCA regulatory parameter. However, changes to the FCA’s regulatory perimeter can only be determined by HMT. The FCA will therefore engage with UK HM Treasury (HMT) to consider these issues and potential options as part of work on moving provisions of the UK Payment Services Regulations 2017 and UK Electronic Money Regulations 2011 into the FCA’s Handbook.

Should you have any questions on the above, do not hesitate to contact members of the Bird & Bird team.

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[1]CP24/9 Big tech and digital wallets call for information | Payment Systems Regulator

[2]FS25/1: Big tech and digital wallets

[3]CMA to investigate Apple and Google's mobile ecosystems - GOV.UK

 [JS1]Does it also include e.g. Apple watch, tablets, etc? 

 [JS2]Can we provide example of designated digital activity? Presume this is e.g. browser, smartphone, tablet, etc.?