US PIRG & CDD Urge CFPB to Protect Consumers/Small Businesses in the "wild west" of Online Payments & Digital Platforms

Jeff Chester

"Surveillance" Marketing meets what Google calls "embedded finance" online


USPIRG and CDD believe the U.S. is at an especially critical inflection point regarding digital platforms, digital payment services and online consumer protection: the pervasive tracking of data on individuals, families and groups, online and off; the nearly real-time ability to target a consumer with financial and other product offers regardless of where they are or device they use; and the development of a highly sophisticated and now machine-driven apparatus to deliver personalized marketing and communications, have all led to a largely unaccountable digital marketplace. A handful of digital platform giants and their partners stealthily operate what is known as a “surveillance marketing” system, which now pervades every aspect of our lives—increasingly affecting how the public engages with the financial services sector. As the Bureau’s Request for Comment illustrates, it is aware of the serious ramifications to consumers and small businesses as the U.S. accelerates its transition to what Google calls “embedded finance.” The leading platforms and online services, as they accelerate their roles as America’s new bankers and lenders, bring with them a host of critical issues that the Bureau must address. Moreover, the industry’s “closed-loop” business model, where platforms and online data and ad practices are able to operate in a non-transparent manner, which has already caused an uproar from global marketers, is poised to have even greater consequences as it assumes greater control over our daily financial experiences.  The growing role of platforms to leverage their market positions to shape the digital payment system is now disintermediating “banks and credit card companies from consumers.” These platforms are poised to dominate consumer and small business financial markets as much as they now do ecommerce, entertainment, and communications. In the process, these platforms and their online financial and other service partners will pose a series of threats. Their operating model, as we discuss below, engages in far-reaching forms of consumer manipulation, relying on a host of online marketing tactics designed to trigger a range of responses. There is a very real risk that without Bureau action, the digital payments and platform complex will aggressively push Americans to new levels of debt, as the Big Data and artificial intelligence (AI) apparatus now at the core of the consumer digital economy encourages impulse buying and other potentially consequential practices. These entities have so much information on individuals, communities and commerce, they easily dislodge smaller and locally-based businesses. Since data analyzed by the platforms is used to identify commercial opportunities across the range of their product offerings—which is basically making everything available for sale—a consumer will not be aware, let alone control, how this information can be used to target them with other products and services. As Alphabet/Google highlighted in a recent report on “embedded finance,” “online finance” has altered what people think is banking and managing finances: “now, most financial transactions happen via mobile apps, websites, email, text messages and other digital communications.” Google’s “white paper” suggests that embedded finance may be “the new gold rush” for financial services. Among the competitive benefits claimed by Google are that embedded finance “enables business to reach new customers at the moment when they need your services.” There is also an added “bonus”: “the data you collect from each transaction….”