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The Central Bank of Brazil (BCB) has targeted the growing influence of digital wallet giants such as Apple Pay and Google Pay, launching a public consultation on new rules governing card tokenisation services.
Stakeholders have until June 2, 2025 to respond to the tokenisation consultation, as the central bank seeks input from the public and financial services sector on how best to regulate companies that request and store payment instrument data tokens, a role fulfilled by digital wallet services including Apple Pay, Google Pay and Samsung Pay.
These “token requesters” act as intermediaries between card issuers and merchants, generating and storing secure tokens that stand in for a user's card credentials during transactions.
The process has long underpinned the security and convenience of smartphone-based card payments. However, the BCB is concerned that the rapid adoption of these services has created new imbalances in the payments ecosystem.
“The regulator's concern arises because token applicants have gained significant market power over issuers due to these services being embedded in smartphones, which, due to the convenience offered to users, have become an essential tool in the way consumers and merchants interact in payment transactions,” the consultation says.
Brazil has experienced explosive growth in digital payments in recent years, with card transactions surging from 7.2bn in Q3 2020 to more than 12.3bn in Q3 2024, with such widespread use of smartphones and mobile wallets making tokenisation a core component of the payment process, and granting international companies such as Apple, Google and Samsung considerable leverage, according to the BCB.
Market power, hidden costs
The BCB said this leverage has enabled token service providers to impose high fees on card issuers, which often feel pressured to absorb the cost to avoid losing customers.
That, in turn, could limit access to digital wallets for less profitable users or lead to cross-subsidisation that distorts the market.
“Since consumers are generally averse to paying for the use of the service and issuers fear losing customers they do not provide access to the service, token applicants have an incentive to monetise their business over card issuers, who tend to absorb these costs or pass them on to the group of consumers (users or not of the tokenisation service) via other fees,” the consultation says.
The regulator warned that this could hinder financial inclusion and restrict the ability of smaller or less profitable issuers to compete.
Options on the table
The BCB is weighing two possible regulatory approaches.
The first would require payment schemes to include token applicants as a specific participant category in their rulebooks.
The alternative option is much more stringent and would see token applicants become authorised and supervised entities under BCB oversight.
In either case, the BCB is considering setting fee caps to limit what token applicants can charge issuers, either directly through regulation or indirectly through payment scheme rules.
Public input is also being sought on whether fee structures should vary by card type (such as credit, debit or prepaid), and whether caps should be fixed amounts, percentages of transaction value or a hybrid model.
The consultation also raises questions about how to define a token requester and whether other services should be considered under a broader public policy for the payments sector.
Competition or innovation?
Although the regulator believes intervention may be necessary to ensure fair pricing and maintain a level playing field, it is also treading carefully to avoid stifling innovation.
“There is no competitive pressure to moderate the fees charged by token applicants to issuers,” the BCB noted. “But regulatory interventions, when not balanced, can cause negative externalities.”
These could include reduced innovation, higher barriers to entry or even degraded service quality, the central bank warned.
