By Nathalie Voit
The Consumer Financial Protection Bureau (CFPB) will investigate how tech giants Apple, Facebook, Google, and Amazon use consumers’ financial information. In a series of orders enacted on Oct. 21, the CFPB revealed it had launched an inquiry into how these firms and others operate their payments platforms and manage users’ personal data.
“Big Tech companies are eagerly expanding their empires to gain greater control and insight into our spending habits. We have ordered them to produce information about their business plans and practices,” said CFPB Director Rohit Chopra.
The initial orders were also issued to popular payments services Square and PayPal. In addition to investigating the six technology platforms, the CFPB will also be probing Chinese tech giants WeChatPay and Alipay on their data harvesting and monetization practices.
The agency noted the long-term implications of these forces in China.
“Alipay and WeChat Pay are deeply embedded into the lives of the Chinese public, combining messaging, e-commerce, and payment functionality into super-apps. In such a market, consumers have little choice but to use these apps and little market power to shape how their data is used,” the CFPB warned.
The agency has ordered the payments services to turn over information on their payments systems plans, products, and practices to safeguard consumer protections.
The move comes as large tech companies expand their reach and delve into the electronics payments space. During the pandemic, the rise of online commerce accelerated the development of new consumer payments products aimed at meeting market demand for fast, cheap, and hassle-free payments systems. At the same time, large companies operating payment platforms pose a risk to consumers and the survival of a “fair, transparent, and competitive marketplace,” the agency noted. Large tech firms like Apple and Google, for example, could potentially monetize consumer behavior information by selling the data to advertisers and e-commerce sites seeking to exploit and profit off behavioral targeting practices.
Moreover, payments systems like Venmo and Square enjoy an advantage due to economies of scale. Small businesses may be tempted to participate on the platform “out of fear of being suppressed or hidden in search of product listings.” The natural monopolies arising from these powerful network effects can directly limit consumer choice and stifle innovation, said the CFPB.
The agency’s orders are the latest in a series of moves by the Biden administration to scrutinize Big Tech. The administration appointed individuals publicly known for their criticism of large tech firms, including the CFPB’s director Rohit Chopra and Federal Trade Commission Chairwoman Lina Khan.
In addition, Republican and Democratic lawmakers recently united to support tougher tech legislation. The Biden administration’s hardline stance on Big Tech is a rare point of consensus between the two parties.
“There’s a different sense of urgency now, coupled with a level of bipartisanship that is truly rare,” said Tim Wu, special assistant to President Joe Biden for technology and competition. “This is, as they say, the moment.”