U.S. MSB Daily News
USMSB.com — Digital wallets are turning into pocket-sized “mini-banks” — and Washington can’t decide whether to rein them in or get out of the way.
Consumers are tapping their phones for everything from coffee to concert tickets, while wallets add features like lending, investing, crypto, digital IDs and virtual cards. Regulators, meanwhile, are stuck chasing yesterday’s rules through today’s apps.
From “beaming money” to billion-phone banking
Back in 1999 — eight years before the first iPhone — a Silicon Valley startup called Confinity pitched PayPal.com as a “killer app” that let users send money with just an email address.
It started with an even weirder concept: transferring funds via infrared beams. Confinity famously demoed the idea by “beaming” $3 million between Palm Pilots at a Woodside, California breakfast spot called Buck’s — an event later retold by co-founders Max Levchin and Peter Thiel in a Stanford talk.
Fast-forward a quarter-century and the “email money” experiment has morphed into a global wallet industry living on billions of phones — with many users treating plastic cards like yesterday’s landline.
Wallets now do everything — and that’s the point
Today’s wallets aren’t just for payments. They can also carry:
- digital driver’s licenses and passports
- tickets and passes
- cryptocurrency
- stocks and trading tools
- lending and paycheck deposits
- virtual credit/debit cards and rewards
Fintech players like PayPal and Block (Cash App) keep piling on features to win the next wave of users.
Who’s winning in the U.S.
Statista survey results from the third quarter showed the most-used U.S. payment services over the prior 12 months were:
- PayPal — 32%
- Cash App — 25%
- Apple — 20%
- Google — 14%
- Venmo — 14%
- Samsung — 3%
Statista said 77% of Americans surveyed used at least one of the top three (PayPal, Cash App, Apple) in the third quarter, based on an online sample of roughly 60,000 U.S. adults ages 18–64.
The Federal Reserve’s annual payments survey also shows phone payments rising fast: consumers averaged 11 monthly phone payments last year, up from four in 2018. Adults 18–24 used phones for 45% of all payments, while households earning under $25,000 and adults 55+ leaned more on cash.
Globally, Juniper Research pegged digital wallet users at about 4.5 billion today, projecting growth to 6 billion by 2029.
The data problem: Big Tech doesn’t love sharing numbers
Precise U.S. wallet usage is tough to pin down because Apple and Google don’t publish user counts and roll wallet performance into broader business categories.
Block does provide a clearer window: Cash App reported 58 million active users in September 2025.
The CFPB tried a bigger stick — then it got yanked away
As wallets expanded into “bank-like” territory, the Consumer Financial Protection Bureau (CFPB) under the Biden administration pushed for more direct oversight.
A former CFPB policy analyst, Lacey Aaker (now at Consumer Reports), argued the issue is simple: wallets can look like banks to everyday users, but don’t always come with the same guardrails — and most people aren’t reading fine print about deposit insurance or which transfers are protected by federal rules.
In November 2023, the CFPB proposed a rule called “Defining Larger Participants of a Market for General-Use Digital Consumer Payment Applications.” The idea: bring the biggest nonbank payment apps under CFPB supervision, including routine exams similar to what banks face.
The CFPB’s final rule (later rolled back) would have covered seven nonbank firms processing at least 50 million consumer transactions per year — representing roughly 98% of 13.5 billion consumer payment transactions, per the article’s reporting.
The CFPB didn’t publicly name the companies in the rule itself. But the names surfaced when Congress moved to overturn it, with the CRA resolution citing: Google, Apple, Samsung, PayPal (and Venmo), Block (Cash App), and Meta (Facebook).
The rule took effect in January 2025, tech firms sued to block it, and lawmakers moved to kill it. Congress passed the resolution and President Trump signed it in May, reversing the CFPB’s approach.
One Washington attorney, Jonathan Pompan of Venable, described the CFPB effort as trying to retrofit older consumer-credit laws onto modern payments — and said Congress “pulled the plug.”
Regulatory reality check: wallets are regulated — just not neatly
Even with the CFPB’s “larger participants” rule dead, wallets still sit inside a crowded legal maze.
According to the article’s sources, oversight typically includes:
- state money transmitter licensing (and enforcement power)
- federal consumer protection rules tied to electronic transfers (Reg E / EFTA), depending on the product and transaction type
- UDAP/UDAAP-style enforcement (unfair, deceptive, abusive practices) by agencies like the CFPB and FTC
- Treasury/FinCEN expectations around financial crime compliance where applicable
- bank-partner supervision when wallet funds flow through insured institutions
FTI Consulting managing director Laura Huntley (a former banking regulatory attorney) summed it up bluntly: wallets have been regulated and will keep being regulated — just under what she called a dense and messy framework. A Financial Technology Association spokesperson likewise argued wallet firms are heavily regulated through state licensing and bank partnerships.
The CFPB itself is now part of the story
The article notes the CFPB is facing questions about its future, including disputes over its funding mechanism and reports of enforcement work shifting to the Justice Department, alongside potential staffing cuts.
Huntley and others pointed to a likely outcome if federal enforcement weakens: state attorneys general stepping up as the next major market cops.
Why the U.S. is different from India, Brazil — and others
Statista analyst Raynor de Best argues the U.S. didn’t build payments around wallets from scratch because Americans already had deep credit/debit card habits.
In many emerging markets, mobile payments infrastructure and regulation grew together — while the U.S. is trying to bolt wallet oversight onto a mature card system and a complex federal/state setup.
Trust is the whole game
Consultants quoted in the piece say reputable wallet operators have strong incentives to protect users: lose trust, lose the platform.
Google said it stays in dialogue with regulators and supports consistent frameworks that protect consumers while allowing innovation.
Block business lead Owen Jennings said recent Cash App expansions — including digital currencies and broader lending — reflect how customers live now, but also raise the trust bar: as the app becomes a full financial platform, the stakes climb.
MSB Impact
For MSBs and payments operators, the practical risk isn’t “no regulation.” It’s confusion, inconsistency, and product creep.
- Disclosures & consumer expectations: Users may assume balances are insured or disputes are handled like a bank account — when coverage can vary by feature.
- Reg E operations: Error-resolution and unauthorized-transfer handling can become messy when wallets blend transfers, cards, stored value, and third-party rails.
- State licensing pressure: The “patchwork” remains — and expansion into new features can trigger new state and federal obligations.
- Bank-partner dependency: If your model depends on bank sponsorship, the compliance burden doesn’t disappear when a CFPB rule dies.
- Complaint pathways: Even without an expanded CFPB supervision layer, consumer complaints and reputational fallout still hit hard.
What to watch next
- State AG enforcement momentum if federal supervision continues to soften.
- Wallet feature expansion (credit, crypto, investing) that pulls new regulators and rules into the mix.
- Market trust failures — one big consumer harm event can flip the political mood back toward a crackdown fast.
Source: Reporting originally published by CFO Dive, “Digital wallet use outpaces regulators” , December 3, 2025.
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