Big Tech payment apps are the 'holy grail' of surge pricing, says CFPB's Chopra

By Chris Matthews

'Companies want transaction data so they know how much you're willing to pay,' the regulator said

The practice of "surge" or "dynamic" pricing is common in markets ranging from airlines to supermarkets - and U.S. regulators are concerned that the growing role of tech giants will further power this trend at the expense of the American consumer.

Consumer Financial Protection Bureau Director Rohit Chopra told MarketWatch in an interview that he is watching how interested some tech companies are in compiling transaction data on U.S. consumers.

"Tech companies such as Venmo, Cash App (SQ), PayPal (PYPL) - many firms are looking to get their paws on transaction data because transaction data, I think, will be the holy grail for doing personalized pricing," Chopra said on the sidelines of a conference staged by the International Association of Privacy Professionals. "Companies want the transaction data, so they know how much you're willing to pay."

While privacy laws like the Fair Credit Reporting Act give regulators like the CFPB some power to oversee how companies handle customers' financial data, Chopra said that he thinks Congress needs to pass new laws regulating the use of transaction-level data.

The Federal Trade Commission has relied on its existing authority to go after data-broker companies that it says are selling customer data in ways that are illegal under current law.

In January, the FTC settled a complaint with data broker X-Mode Social and its successor Outlogic after allegations that the company illegally sold sensitive location-based data without properly informing its customers.

Many U.S. consumers have qualms about the practice of charging different prices to different people, as evidenced by the outrage expressed following the announcement by fast-food chain Wendy's Co. (WEN) that it would soon experiment with dynamic pricing.

The company said last month that it was not, in fact, planning to raise prices during periods of high demand.

Chopra said that Americans must be vigilant regarding Big Tech companies' surveillance capabilities and how they may be levered to make dynamic pricing more effective for corporations.

"If you look at China, we see the vast majority of transactions being done through AliPay," he said. "And here in the U.S., we're starting to see mass adoption of Google Pay (GOOGL) (GOOG) and Apple Pay (AAPL)."

-Chris Matthews

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04-04-24 1538ET

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