CFPB Report Warns Against FinTech Platforms

In case it’s unclear to anyone at this point, the Consumer Financial Protection Bureau (CFPB) is on the cusp of new payment types taking markets by storm, concerns spelled out in an August report that reads as part overview and part consumer warning.

According to a press release accompanying the 19-page CFPB report titled “The Convergence of Payments and Commerce: Implications for Consumers,” the CFPB is “focused on how large technology platforms and other new business models that operate outside the traditional banking system use people’s sensitive spending and transaction data. We want to preserve the benefits of real-time payments while ensuring that the US payments ecosystem is fair, transparent and competitive.”

The report cites three major payment technologies that are having a major impact on consumer finance today: super apps; buy now pay later (BNPL); and embedded commerce.

On the superapp front, the CFPB’s concerns are directed at whether “these products may limit consumers’ product and service choices. While consumers may choose to use a payment offering outside of an app, such superapps create the potential for providers to direct consumers to specific solutions and/or limit access to certain products.”

Consumers do not share the CFPB’s concerns. According to the study “The Super App Shift: How Consumers Want To Save, Shop And Spend In The Connected Economy,” a PayPal and PYMNTS collaboration surveying nearly 10,000 consumers in four nations: “84% of respondents value at least moderate a potential super price app’s ability to use different payment methods with varying spending categories.”

Breaking it down, 57% of respondents “very” interested in a super app value the ability to use different payment methods across spending categories, as do 28% of those “somewhat” or “somewhat” interested, showed our research.

Moreover, it is a question of trust for consumers. The study adds that “A provider’s reputation for reliability and security is key to alleviating international consumers’ concerns about sharing their data with a super app.”

Get your copy: Super App Shift: How consumers want to save, shop and spend in the connected economy

BNPL, embedded on the radar

Next on the list of three is BNPL – a sector the CFPB has been investigating since 2021 looking at consumer debt burdens and the credit bureau’s plans to track BNPL payments.

In its August report, the CFPB said: “In their most recent incarnations, BNPL providers do not position themselves as lending solutions or even payment providers, but as marketing platforms that sell prime placement on their highly popular apps to merchants who pay affiliate fees to acquire consumers.” CFPB’s position comes down to this: BNPL is a credit product.Period.

We investigated this in the study “BNPL And The In-Store Opportunity”, a PYMNTS and Zip collaboration, based on surveys of 2,000 US consumers. The big takeaway is that no matter how BNPL providers market themselves, the typical user understands that they are actually borrowing and have to pay back on agreed terms or face fees and more.

Perhaps most importantly, consumers like the product and feel it helps make things more affordable, especially when discretionary income is disappearing as quickly as it is being earned.

The study says, “Among department store customers, 46% of online customers and 41% of in-store customers say they are very interested in using an installment payment method like BNPL. This similar trend continues for the remaining two segments, with about a third of department store and local business customers is very interested in using installments for purchases in store and online.”

Read it now: BNPL and the opportunity in the store

The CFPB also views the growth of embedded finance with a bit of suspicion. According to the report, reducing purchase friction in social feeds is good, “but it creates opportunities for the social media provider to capture and sell transaction data to merchants and other third parties without the consumer being aware that their data is being exploited and monetized.”

“An embedded payment in a social media feed also creates an opportunity to activate a transaction with very little activity from the consumer, increasing the risk of an unwanted purchase,” the CFPB said.

Here, too, consumers and sellers are excited about the experiences it enables.

In a recent PYMNTS interview after announcing its strategic partnership with TikTok, WooCommerce CEO Paul Maiorana said of built-in social payments: “I think it’s absolutely clear from a consumer standpoint that for me as a shopper, I love that experience, the ability to buy right. on one platform. We want to strengthen that as well.”

Read: Social commerce takes a giant step when entertainment mixes with entrepreneurship

NEW PYMNTS SURVEY FINDS 3 IN 4 CONSUMERS WITH STRONG DEMAND FOR SUPER APPS
About: The findings of PYMNTS’ new study, “The Super App Shift: How Consumers Want To Save, Shop And Spend In The Connected Economy”, a collaboration with PayPal, analyzed the responses of 9,904 consumers in Australia, Germany, the UK and the US and showed strong demand for a single multi-functional super app instead of using dozens of individuals.