A warning has been issued to consumers relying on digital wallets, such as Apple Pay and Google Pay, after a report by the Financial Conduct Authority (FCA) and the Payment Systems Regulator (PSR) highlighted potential risks linked to their increasing popularity.
Surge in Digital Wallet Transactions
The report reveals that the number of payments made using digital wallets has more than tripled, with transactions soaring from 8% in 2019 to 29% in 2023. The trend reflects the growing convenience of contactless mobile payments via smartphones and other electronic devices.
Concerns Over System Failures and Market Competition
Despite the convenience and security of digital wallets, regulators have raised concerns about:
- Operational Failures – If digital wallet services experience an outage, customers may find themselves unable to make payments both online and in-store.
- Market Monopoly – Apple Pay and Google Pay dominate the UK market, limiting competition and innovation. Regulators are calling for more market players to ensure consumers have greater choice.
- Financial System Resilience – As reliance on digital wallets grows, regulators warn of increased risk if technical failures prevent millions from making transactions.
Official Statement on Digital Wallets
The regulators’ statement explains:
“Apple Pay and Google Pay are the two largest providers of ‘pass-through’ digital wallets in the UK.
These digital wallets allow users to make payments from a payment card but do not hold funds themselves. They rely on converting payment card details into a ‘token’ that securely links the card’s primary account number to a virtual card on a consumer’s device.”
While consumers benefit from faster transactions, added security, and accessibility, the regulators say further innovation is needed to ensure the system remains reliable and competitive.
Government and Regulatory Response
The Competition and Markets Authority (CMA) has been informed of the findings, and regulators plan to engage with the Treasury as part of a wider review of Payment Services and Electronic Money Regulations.
Consumers are advised to have backup payment methods in case of technical issues with digital wallets.
