Laura WilesThe FCA Practitioner Panel has published its response to the PSR and FCA’s call for information on the benefits and risks of digital wallets.
The Panel noted some “clear and compelling” benefits of digital wallets to consumers, including flexibility, convenience, and ease of control for payments. It noted that they are particularly successful when based on open standards in “embedded finance”, allowing consumers to vary their payment method easily.
However, the Panel noted that regulatory and legislative frameworks have struggled to keep up with the pace of innovation. The responsibility for providing support to consumers using digital wallets has fallen on the provider of individual payment instruments within a wallet, who do not have oversight on the overall consumer position and cannot “control” that consumer’s experience in the overall wallet.
The Panel suggested that the regulators might address this by clarifying the proper allocation of responsibility between the provider of the digital wallet and individual payment providers. It suggested a similar clarification in respect of liability for unauthorised transactions. The Panel also argued that digital wallet providers ought to have the same incentives to prevent fraud as Account Servicing Payment Service Providers.
The Panel concluded by noting that although there are many benefits arising from growth in digital wallet infrastructure, regulators should ensure that rapid innovation does not compound existing issues with the underlying operating model and consumer protections. It believes the regulators should prioritise creating a proper commercial model with consumer protections for account-to-account payments, to be progressed via the forthcoming National Payments Vision.