Following a call for evidence, the FCA and PSR have issued a report on digital wallets.  They say that the use of digital wallets has rapidly grown in recent years with the proportion of card transactions using a digital wallet increasing significantly from 8% in 2019 to 29% in 2023.

Due to the growth, the FCA and PSR have assessed the impact of digital wallets. Their assessment found significant benefits for consumers through greater convenience, enhanced security measures, and, for some, greater financial inclusion.

The FCA and PSR also heard concerns, including improvements needed to enable competition among digital wallet providers and allowing new players to enter the market, improving innovation. In turn, this could expand the range of alternative payment methods on offer, giving consumers more choice.

The two regulators have shared the competition findings with the CMA as it is currently investigating the mobile ecosystems market and key digital wallet providers.  They also believe it is best placed to use its powers under the Digital Markets, Competition and Consumers Act 2024 such as investigation powers and the ability to impose conduct requirements.

They also intend to engage with the Treasury as part of its review of the Payment Services and Electronic Money Regulations to ensure the regulatory framework is future-proof.

The FCA and PSR say that they will embrace digital improvements that benefit consumers. This includes progressing work on open banking and contactless payments to boost competition and enhance the UK's growth and competitiveness. This aligns with the National Payments Vision of a modern, resilient, and innovative payments landscape that supports the evolving needs of consumers and businesses.