The government thrives on regulation, and when new and burgeoning markets find themselves operating in unregulated territories, it doesn’t take long for the state to intervene.
Technological advances have been leading us away from a physical-cash-based society for some time. Debit and credit cards have been the preferred substitutions to physical money, and now young Americans are utilizing peer to peer online and smartphone technology as an alternative to traditional banking.
Since peer-to-peer services have become popular with young consumers, services like Venmo and Google Wallet have caught on quickly. Many young people love the convenience of being able to use their smartphones to transfer funds to another person almost instantaneously. However, it is precisely this popularity that has led Washington to find ways to regulate this new market.
Earlier this month, the Consumer Financial Protection Bureau (CFPB) made the decision to regulate Venmo, Google Wallet, and Square under rules traditionally meant for prepaid accounts, such as prepaid debit cards. Since prepaid debit cards are most often used by those from lower socio-economic backgrounds, many of whom do not have access to a bank account, the state has justified its oversight in this sector by claiming regulation is needed to ensure the consumer protection.
The new rule would require that these companies limit consumer losses in instances where funds or cards are lost or stolen. This would essentially force these companies to fall under regulations for the banking industry than other peer-to-peer platforms.
Despite the objections presented by the Google Wallet and PayPal, who now owns Venmo, the CFPB has decided to move forward and has stated that, “The bureau believes that consumers who transact using digital wallets deserve the same protections as consumers who use other prepaid accounts.”
While this sounds like a noble endeavor, it is important to note that Venmo and Google Wallet are not prepaid accounts, and should not fall under the same regulation as prepaid debit cards. In fact, apps like Venmo require a linked bank account before you can send or receive funds, as opposed to prepaid debit cards which can be purchased with cash just about anywhere.
Additionally, the data used by the bureau to justify these new regulations lumped prepaid account users in with digital wallet users, which does not paint an accurate picture of who is using this technology and why, since the profiles of these uses are vastly different.
Millennials aren’t using services like Venmo because we lack access to traditional banking or have low incomes. We use Venmo because of the convenience it provides for us. Splitting rent, groceries, or the check at a restaurant used to require carrying cash . Now, all it takes is a smartphone.
One aspect also worth noting is the privacy that comes with most peer-to-peer networks. In the wake of the 2013 Edward Snowden leaks, young Americans have become increasingly aware of the lack of privacy in the “freest country” in the world. As a result, they have been the most vocal advocates against government surveillance of their daily lives and finances.
While Venmo allows other users in your network to see your transactions (if you allow them to), there are still fewer restrictions than with banks which are required to share your information, including your purchase history, with the government if any suspicious activity is detected thanks to the escalating drug war and legislation like the Patriot Act.
Millennial consumers want to be left alone. We want to conduct our business and move on to the next task without government interference. Allowing the state to regulate this currently unregulated sector will not only stifle this growing market, it will invite further regulation in a field whose mass appeal is less regulation.
If the government really wants to help protect the consumers, especially the young consumers, they will allow us to make our own decisions and be responsible for the consequences of those choices.
Brittany Hunter is a Mises University alumna, blogger, and creator of digital content for Generation Opportunity.
