Big tech firms entering banking: be careful what you wish for
Big tech firms, whether entering or already active on payments markets, are under scrutiny. PSD2 has opened up the payments markets to non-bank companies, but this comes with both risks and opportunities. EU regulators are examining anticompetitive risks, for example the possibility of leveraging a strong position in one market into another market. Competition, innovation, privacy and security for financial transactions will all be hot topics as scrutiny increases on providers of payment services.
The message remains as vital as ever: antitrust rules should be kept in mind when engaging in any of these services. Firms are advised to keep an eye on this developing field – no doubt interesting times lie ahead.
The revised directive on payment services (PSD2), which entered into force in early 2019, allows non-bank companies to offer their innovative services on the payments markets. Alongside small fintech companies, various big tech firms are now active – or planning to be active – on these markets, where EU regulators will be watching their every move.
The European Commission (Commission) is keeping an eye on possible anti-competitive market practices and abusive conduct on payments markets by actively monitoring the development of mobile payment solutions and the behaviour of operators active in the payments sector. One such concern, for example, is whether Apple may favour its own service (Apple Pay) over other payment methods. Requests for information were sent to banks, online payment providers and app developers, requesting input on Apple Pay. The Commission is also examining Facebook’s plans to launch its new cryptocurrency ‘Libra’. Even before its actual market entry, the Commission is looking into how Libra-backed products and services will be integrated into Facebook’s platforms; an investigation encompassing not only questions related to competition, but also concerning innovation, privacy and security for financial transactions. In such an interconnected field, increased coordination between regulators only seems a matter of time.
Meanwhile, the Dutch Authority for Consumers & Markets (ACM) has launched a market study into the activities of major tech firms on the Dutch payments market. According to the ACM, big techs could leverage their strong positions on one market into another market, to prevent other (smaller) providers from entering payments markets. Similarly, the French competition authority has issued a market study into the entry of “digital giants”, with Bitcoin and Libra as particular points of interest.
It is clear that payments markets come with both risks and opportunities for big tech firms. Such firms are advised to seize the opportunities presented to them, but ensure they fully adhere to antitrust rules when entering the payments markets. Undoubtedly, there will be more to come on this rapidly-evolving area, so watch this space for any future developments.
This article was published in the Competition Newsletter of December 2019. Other articles in this newsletter:
