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Increased competition scrutiny of payments markets:

Emerging trends in Europe

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Payment markets are no stranger to competition law enforcement with authorities around the world having made significant infringement findings in these markets over the years. But as payment markets digitalise, competition authorities are facing new challenges and expanding their enforcement toolkit in response. This publication looks at how competition authorities are already acting to promote effective competition and what payment companies should expect in the future.

Digitalisation

2019 brought with it increased global antitrust scrutiny of digital markets and reflection on whether existing competition law enforcement tools remain fit for purpose. The intersection between technology and payments has proved no exception. Digitalisation of payments is transforming markets (quickly) and with that presenting novel antitrust questions for competition authorities as well as sectoral regulators and central banks.
 

New market entrants

The primary focus of competition authorities has traditionally focused on incumbent banks, using competition law and policy as a tool to prise open markets for newer players through, for example, open banking initiatives. With the much anticipated arrival of Big Tech players in payments including the likes of Google, Amazon, Facebook and Apple, often referred to as “GAFA”, there is a growing perception that Big Tech may be able to break into payments markets and quickly scale up services (due to network effects and large user bases). 

Reflecting on general concerns around digital markets, authorities will be wary that Big Tech may seek to exploit their positions in their base markets and perceived superior data advantages to the detriment of competitors and ultimately consumers. Competition authorities are tasked with grappling with the interaction between market participants – the incumbents, new fintech and Big Tech – in what are often nascent and rapidly evolving payments markets.

Five emerging trends in Europe

 

Big Tech under scrutiny in rapidly evolving payments markets

As technology players continue to enter the payments space either on their own or through partnerships, competition authorities are already looking closely at what Big Tech companies are doing in payments markets. This can take early form antitrust scrutiny under the dominance lens as we have seen with respect to the European Commission’s renewed interest in Apple Pay. 

Use of soft enforcement tools, such as market studies and inquiries

Antitrust and sectoral regulators continue to use softer enforcement tools such as market studies and inquiries to get to grips with complex and fast evolving payments markets. 

Competition objectives driving the regulatory agenda

The use of soft enforcement tools may be the precursor to more direct antitrust enforcement and competition tools may drive the regulatory agenda to ensure a true level playing field between the different types of players active in payments, including potentially mandating a degree of data sharing by Big Tech.

Scrutiny of mergers in the digital payments sector

Building on concerns globally around whether high profile digital markets mergers are being sufficiently analysed by competition authorities, we can expect authorities to be closely scrutinising mergers in the payments sector, where Big Tech is already under the microscope, as well as speculating as to how competition will play out in these dynamic fast changing markets.

Global stablecoins and state-backed alternatives: finding the sweet spot for healthy competition

Finally, global stablecoin proposals offer the promise of healthy competition in retail payment markets. At the same time, new payments infrastructure that combines industry collaboration with the potential for rapid global scaling is likely to attract early attention from antitrust authorities. The challenge for governments, central banks and authorities alike will be to strike the right balance to avoid themselves dampening competition. 

Increased competition scrutiny of payments markets:

Emerging trends in Europe

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