The US consumer protection watchdog in the financial sector has tightened its oversight on nonbank firms offering digital payment services. Consumer Financial Protection Bureau (CFPB) has finalized a rule targeting firms such as Apple, PayPal, and Zelle, which collectively process billions of transactions each year, CNBC reported.

This move comes as the government agency seeks to ensure these tech giants adhere to the same standards as traditional financial institutions, including banks and credit unions.

Over 13 billion transactions are reportedly processed annually through these platforms, with services like Apple Pay, Venmo, and PayPal quickly becoming essential for everything from sending money to paying for everyday purchases.

Tightening Regulations

The new rule will subject these companies, which handle at least 50 million transactions a year, to more stringent oversight. Previously, the CFPB's authority over these companies was limited, primarily overseeing electronic fund transfers.

However, the CFPB has now gained the ability to conduct examinations similar to how it monitors banks. This means that the Bureau can now demand company records, interview employees, and ensure compliance Compliance In finance, banking, investing, and insurance compliance refers to following the rules or orders set down by the government regulatory authority, either as providing a service or processing a transaction. Compliance concerning finance would also be a state of being following established guidelines or specifications. This designation can also encompass efforts to ensure that organizations are abiding by both industry regulations and government legislation. Understanding ComplianceCompliance is a In finance, banking, investing, and insurance compliance refers to following the rules or orders set down by the government regulatory authority, either as providing a service or processing a transaction. Compliance concerning finance would also be a state of being following established guidelines or specifications. This designation can also encompass efforts to ensure that organizations are abiding by both industry regulations and government legislation. Understanding ComplianceCompliance is a Read this Term with regulations aimed at protecting consumers' privacy, preventing fraud, and stopping illegal account closures.

The rule also addresses a growing concern about the financial inclusion of underserved groups. Many of the most popular apps have gained particularly strong adoption among low- and middle-income users, who often rely on them for everything from storing cash to making payments.

The CFPB's move aims to safeguard these consumers and ensure that their financial interactions are protected. While the rule was first proposed to target companies processing at least 5 million transactions annually, the threshold was raised to 50 million in the final version.

Targeting Tech Giants

This change limits the expanded oversight to seven key players, including giants like Apple, Google, PayPal, and fintech Fintech Financial Technology (fintech) is defined as ay technology that is geared towards automating and enhancing the delivery and application of financial services. The origin of the term fintechs can be traced back to the 1990s where it was primarily used as a back-end system technology for renowned financial institutions. However, it has since grown outside the business sector with an increased focus upon consumer services.What Purpose Do Fintechs Serve?The main purpose of fintechs would be to suppl Financial Technology (fintech) is defined as ay technology that is geared towards automating and enhancing the delivery and application of financial services. The origin of the term fintechs can be traced back to the 1990s where it was primarily used as a back-end system technology for renowned financial institutions. However, it has since grown outside the business sector with an increased focus upon consumer services.What Purpose Do Fintechs Serve?The main purpose of fintechs would be to suppl Read this Term companies like Block (formerly Square).

Retail-specific apps, such as Starbucks, which only process payments for a single company, remain outside the scope of the new rule. Notably, this is one of the few instances where the banking industry has voiced support for CFPB's increased scrutiny of digital payments.

Banks have long argued that companies like Apple and PayPal should face similar regulatory oversight to maintain a level playing field. The rule will take effect 30 days after it is published in the Federal Register.