fintech and foreclosure in payments - cpb.nl · 2018-03-13 · fintech and foreclosure in payments...
TRANSCRIPT
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FinTech and Foreclosure
in Payments
Monitor Financial Sector – 28 February 2018
Michiel van Leuvensteijn
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Objective of this paper:
• What are the risks of foreclosure by banks of FinTechs in the payment industry?
• Which instruments are available to limit risk of foreclosure?
• Relevance: FinTech may change competition in payments industry.
• Payments important area for FinTechs and new regulation (PSD2) is introduced.
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How do you pay?
Over the counter (shop) Online
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The payment system in a nutshell:
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Some FinTechs more important…
• Front-end and end-to-end providers offer new and better products and services to end-users (clients)
• Back-end providers and operators provide mainly efficiency gains for banks
• Innovation and competition is driven from the outside:
• Focus therefore on: – Front-end providers
– End-to-end providers
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Front-end providers
• For example : payment apps (OK!), or digital
housekeeping book.
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End-to-end providers
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When is there a risk of foreclosure
• Market power in the upstream market
• Potential Competitor:
– upstream,
– downstream,
– or related markets.
• Incentive for foreclosure?
– No reason because of complementarity
– One-monopoly-profit argument relevant
– Incomplete complementarity
– Price discrimination
– Regulation
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Application: Front-end providers
• Crucial input: information of payment accounts of clients
• Banks have market power in the upstream market, because they possess unique information of client
• Yes, FinTechs are competitors
• Incentive for foreclosure? – Services often complementary to bank
– But it may diminish competition in the upstream market in the future.
– Contact with customers is important for banks. (information)
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Application: Front-end providers
• Instruments:
– Competition law article 6 and 24
– PSD2: Access to account
• Role for ACM: Competition Law
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Recommendations front-end Fintechs
• Define the conditions under which access must be provided more precisely (DNB).
• The European Commission allows banks to receive compensation amounting to a maximum of the efficient costs.
• The government should introduce a banking license ‘light’ for fintechs, which would give fintechs the possibility of offering their own payment accounts.
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Application: End-to-end providers
• Crucial input: -access to payment systems (clearing and settlement)
– Direct access to clearing and settlement => you need a bank license,
– Indirect access: Payment account for businesses provided by bank.
• Banks have no market power in the upstream market for payment account for businesses.
• Probability that banks collude together seen as unlikely.
• So we do not foresee a foreclosure problem here.
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Application: End-to-end providers
• But we have instruments:
– PSD2: • banks are required to provide payment accounts to Third party
providers,
• non-discriminatory conditions between client and third party.
– Competition Law
• Role of ACM: Monitoring situation.
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Recommendations end-to-end providers
• Introduce a banking license ‘light’ for fintechs, which will give fintechs the possibility of gaining direct access to clearing and settlement systems.
• The definition of objectified criteria for access that match the risks arising from the activities performed by these institutions.
• Safeguard that, in the development of instant payments infrastructures in Europe, fintechs will be able to participate directly in the systems for clearing and settlement on equal and objective conditions.
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Conclusions:
• Foreclosure more likely for front-end providers than for end-to-end providers.
• Main instrument for the ACM is the Competition Law.