Due to the usage of mobile payment systems increasing, there is a need for increased regulation to prevent anti-competitive behavior. Throughout history, consumers have relied on some form of payment system to purchase the goods or services they want or need. From bartering to mobile payment platforms, there is one consistent theme regarding the evolution of payments, that consumers prefer convenience. Generally, mobile payments are defined as the use of a mobile device – commonly, but not exclusively, a smartphone or tablet computer – to initiate a transfer of funds to people or businesses. (Jeffrey M. Kopchik, FDIC). The use of mobile payments continues to rise globally as consumers are increasingly capable of purchasing goods and services with apps such as Apple Pay, Google Wallet, PayPal, and more. United States (“U.S.”) mobile sales are expected to grow from roughly 40 percent of e-commerce this year to 53.9 percent in 2021. (J. Clement, Statista). As use continues to grow, regulators must make a choice as to whether to actively regulate the use of mobile payments to increase competition for the benefit of consumers or allow the free market to reign.

As the mobile payment landscape changes and develops, consumers need to understand the risks, benefits, and costs of alternative payment mechanisms to choose the method that best suits them. As such, the Antitrust Division of the U.S. Department of Justice (the “Division”) has focused on the anti-competitive effect of conduct that restricts merchants’ ability to influence consumers’ payment choices and obstruct competition. (United States, Organisation for Economic Co-operation and Development). The Federal Trade Commission (the “FTC”) also monitors U.S. payment systems for unfair or deceptive practices affecting consumers. Id. To date, no federal laws or regulations in the U.S. specifically govern mobile payments. However, anti-money laundering laws and acts combating the financing of terrorism, such as the Banking Secrecy Act and the U.S. Patriot Act, are interpreted to govern mobile payment transactions (United States Agency for International Development, Deloitte Consulting, LLP). Additionally, consumer protection acts, including the Credit Card Accountability Responsibility and Disclosure Act (the “CARD Act”), the Electronic Funds Transfer Act, 12 CFR Part 1005 (“Regulation E”), the Dodd-Frank Act, and FDIC CFR Part 205, are often interpreted to govern mobile payment transactions. Id.

The expansion of mobile payment systems in Europe has prompted European regulators to start focusing on regulating mobile payments to prevent anti-competitive behavior as a few key players dominate the market. Article 101 of the Treaty of the Functioning of the European Union (“TFEU”) prohibits anti-competitive agreements, decisions of associations of undertaking, and concerted practices that prevent, restrict or distort competition within the European Union market. (European Commission). Article 102 of the TFEU prohibits the abuse of a dominant position within the European Union market. Id.

European banks and payment providers worry that Apple Inc.’s digital wallet expansion in Europe will give Apple Pay services an unfair advantage by limiting access to a critical component only found inside iPhones- Near Field Communication (“NFC”) chips. (Giles Turner, Bloomberg L.P.). NFC chips enable wireless signals that allow Apple Pay users to scan their iPhones for instant charges in stores. Id. Kerstin Altendorf, a spokesperson for the Association of German Banks, is of the opinion that “access to technical interfaces is now a key competitive factor for payment systems,” and “the same conditions should apply to all market participants.” Id. Similarly, Isabelle de Silva, president of the Autorite de la concurrence in France, is also wary of Apple Pay and said there could be “major competition concerns” when other dominant companies wish to enter the payments marketplace and do not have access to the same technology as Apple. (Anthony Aarons, Bloomberg L.P.).

While these comments focus on Apple, regulators and lawmakers in Europe are looking to curb the power of Silicon Valley technology platforms altogether. The European Union antitrust chief, Margrethe Vestager, began scrutinizing Apple Pay and has sought feedback on how iPhones may favor Apple Pay over other payment solutions. (Giles Turner, Bloomberg L.P.). The Netherlands antitrust regulator followed suit and launched a market study to analyze the impact of big tech firms on its payments’ market in October of 2019. Id. Germany enacted a law effective January 1, 2020, which will force Apple and other companies to open up its payment technology to other competitors for a reasonable fee. While consumers may use other mobile payment apps that process transactions through a Quick Response code (“QR code”) that can be read quickly by a cell phone instead of NFC technology, Germany’s rationale for its new law is to allow other companies and banks to utilize the NFC chip in mobile payment technology, as QR codes present security concerns. Id. According to James Moar, an analyst at Juniper Research, QR codes can easily be spoofed. Id.

Recently, the European Commission has opened a formal antitrust investigation to assess whether Apple Pay, violates EU competition rules in the European Economic Area (“EEA”) (European Commission). The European Commission will be investigating Apple’s terms and conditions, other measures for integrating Apple Pay in merchant apps and websites on iPhones and iPads, Apple’s limitation of access to the NFC chips, and alleged refusals to allow access to Apple Pay. Id. Vestager’s decision to look at Apple’s practices comes as consumers are more accepting of mobile payment platforms, as COVID-19 has accelerated the use of online and contactless payments. Id. With Apple reserving the technology for mobile payments, Vestager believes it is important for consumers to have the benefits of new payment technologies, including “better choice, quality, innovation, and competitive prices.” Id.

Increased regulation of mobile payments in the European Union could propel the use of mobile payments all over the world and lead to the global standardization of mobile payments as other companies gain access to the technology necessary for mobile payments. Europe's step toward regulating mobile payments to prevent anti-competitive behavior could force other global leaders, including the U.S., to follow suit, especially as there are more considerable transaction savings for consumers.

As mobile payment platforms increase and expand into new markets, increased regulation may naturally follow to ensure consumers are not denied access to choosing payment platform options that fit their wants and needs.