Britain’s financial regulator has opened a formal investigation into payment giants PayPal, Mastercard, and Visa over concerns that their contractual agreements may be stifling competition in
the rapidly expanding digital wallet market.
The Financial Conduct Authority (FCA) confirmed on Wednesday that it is scrutinizing how PayPal’s digital wallet is funded and utilized. The move represents a rare exercise of the FCA’s enforcement powers under competition law, signaling a heightened level of regulatory interest in the plumbing of the UK’s digital economy.
The probe was first brought to light in a regulatory filing by PayPal, which disclosed receiving notices and information requests from the FCA in March regarding its deals with the two dominant card networks.
Cooperation and compliance
All three companies have confirmed they are engaging with the regulator.
Mastercard stated it is "cooperating fully and transparently" to ensure it meets the "highest standards of competition law."
Visa acknowledged the inquiry into "contractual provisions" regarding PayPal but declined further comment on the pending matter.
PayPal echoed this sentiment, stating they could not provide additional details while the investigation is active.
While the FCA has launched the inquiry, it stressed that it has reached no conclusions as to whether any laws have been breached.
A surging market
The investigation follows a joint report by the FCA and the Payment Systems Regulator (PSR) which highlighted a tectonic shift in consumer behavior. Data shows that digital wallet usage for card transactions in the UK skyrocketed from 8% in 2023 to 29% by early 2025.
Regulators have grown increasingly concerned that "gatekeeper" arrangements between established players could prevent newer, more innovative firms from entering the space. This latest probe into the PayPal-Visa-Mastercard triad complements ongoing scrutiny of Big Tech; in January 2025, the Competition and Markets Authority (CMA) launched a similar inquiry into Apple and Google's mobile ecosystems.
The CMA recently secured commitments from Apple and Google to improve interoperability and fairness within their app stores, but the FCA’s focus on the underlying contractual ties between payment processors suggests a broader effort to deconstruct potential monopolies in the UK’s financial infrastructure. Photo by Lotus Head from Johannesburg, Gauteng, South Africa, Wikimedia commons.
