The Competition Commission (EC) has published today, Wednesday 22 December, the Interim Report on its research in financial technologies (FinTech), the text of which can be found here. The executive summary of the Interim Report is also available here.
The term “FinTech” is used to describe the application of technological innovation to financial services from which new business models, applications, processes or products can emerge and which could have a material impact on the way financial services are provided. . The sector of these financial technologies, ie the provision of financial services through innovative information technologies (artificial intelligence) and communications, is a new and constantly growing market, which in our country is in an initial stage of formation and which provides significant benefits for consumers. and businesses, as it contributes to the development of innovative products, which have significant advantages over traditional financial services, such as speed, convenience, transparency, lower cost and wide availability. This favors the provision of more complete and more personalized services, while enhancing the participation of start-ups in the inclusive financial market.
The industry research survey was designed with the aim of maximizing the involvement of all stakeholders (consumers and businesses). In this context, EA used a variety of methods to collect the necessary data, in particular by organizing open teleconsultation and sending a series of questionnaires. In May 2020, EA published an invitation to any interested party to submit written comments and comments on the prevailing competitive conditions and existing problems in financial technologies, as well as to express interest in participating in a tele-consultation with EA executives. The public consultation was designed with the prospect of functioning as an interactive forum for the exchange of views and took place on 30 October 2020 following the submission of written memoranda by interested companies and bodies. Then, in the period March – May 2021, data questionnaires were sent to 153 companies, which are active in the FinTech sector through a relevant online platform to companies active in the sector. The questionnaire was addressed to traditional financial service providers (eg banks), start-ups and FinTech Technology companies (tech-companies) active in the provision of banking services, payment services, lending, microfinance, insurance services etc.
The Service’s research, its particular characteristics and its inherent weaknesses show that the current market situation is still fluid and evolving. For this reason, it may be premature to draw definitive conclusions about the existence of restrictions or distortions of competition in addition to the issues listed above at this stage of industry research. In this respect, despite the extensive regulation of the relevant markets, which may occasionally create barriers to entry, any proposals for its modification or restriction are made without prejudice to the special role that regulation plays in these markets, in view of their particular characteristics and of the paramount importance of legal certainty. In any case, the experience and know-how of the sectoral regulator and the competent supranational organizations must be taken into account.
A broader issue related to all the markets under investigation, which is at the crossroads of the application of free competition law and sectoral regulatory policy, is related to the possibility of extending the market power of established providers in both the banking and insurance sectors and companies. BigTechs through the use of the voluminous and multi-layered database they have from one market to another, possibly through self-preference or enveloping practices. In addition, this phenomenon is not ruled out to create, for those who can not – at least at the same cost – to collect and / or process valuable information of the same level, possible conditions of exclusion. The possibility of displacing small and / or start-ups (eg through denial of data access) or even exploiting them (eg data access overcharging practices) to access user data. These phenomena may on a case-by-case basis be partially covered by sectoral legislation (see typically the access arrangements adopted under the Payments Directive also known as “PSD 2”), but the Competition Commission must be vigilant. to take action against behaviors that are not fully addressed, especially if they occur at the level of an ecosystem and not just a relevant market. In this regard, the absence of similar regulations in other markets (eg insurtech), as well as the phenomenon of “platforming” and ecosystem development, which is mentioned in the answers of the participants in the survey of the Office, raises again the issue of law enforcement. competition in order to address the issues that arise in their entirety. The need to set up an open banking body, in cooperation with the BoG, may need to be explored in the event of distortions of competition despite the existing regulatory framework.
In particular with regard to payment services, it should be emphasized that national legislation has not made full use of the discretion afforded by the PSD2 Directive to adopt measures aligned with the principle of proportionality in order to allow a more case-by-case approach to licensing requirements. This may result in increased entry barriers for FinTech startups, the licensing of which will result in increased costs, as there is not the necessary flexibility to exempt them from horizontal obligations, which could lead to situations of inequality of opportunity between established payment service providers and those based on new technologies. The same goes for national e-money legislation. There is no fertile ground for a case-by-case approach (possibly through the Sandbox tool), which will facilitate the entry of new players into the market, through reduced obligations, in the light of the principle of proportionality. These deficiencies could be remedied by amending the legal framework so that the restrictions imposed are necessary and directly related to the operational and financial risks faced by FinTech.
It is also advisable to support, strengthen and accelerate the initiatives announced by the European Commission on a retail payment strategy for the EU. In particular, the adoption of initiatives and possibly legislation in the direction of:
– address issues caused by the existence of many different APIs and different levels of API functionality that may interfere with the provision of payment and account information startup services in order to ensure adequate, efficient, secure and equal access to payment account data. The Competition Commission is able to contribute within the competences of the application of the rules of competition law to the efforts of the sectoral regulator, the BoG, to remove the relevant obstacles. In this context, the rapid and appropriate adoption and monitoring of the implementation of the relevant EBA Guidelines on technical standards and the formulation of pricing policies by the Account Service Payment Providers on the basis of reasonable, transparent and uniform cases of discrimination and exploitative pricing practices.
– extending the scope of the Irrevocability Settlement (ADR) Directive to include electronic money institutions and payment institutions, subject to appropriate supervision and mitigation of risks.
– development of a single standard for QR codes presented by both traders and consumers
ensuring the right of access, under fair, reasonable and non-discriminatory conditions, to the technical infrastructure deemed necessary to support the provision of payment services.
In addition, it is important to encourage consumers to use technological means to make their payments. This can be enhanced both through the adoption of clear and less fragmented consumer protection legislation and effective institutional consumer protection.
An overview of the regulatory framework for trust services, the fight against money laundering, terrorist financing and Know Your Customer shows that compliance with the law is still a costly and demanding task which causes regulatory and compliance costs for providers, especially in relation to incumbent banking providers through traditional channels. With this in mind, in future legislation, it would be appropriate to explore the possibility of introducing more specific settings adapted to the new digital environment that could proportionally reduce FinTech compliance costs and yet provide greater clarity and legal certainty with clearer risk-based requirements. customer. In this respect, in cases where the current legal framework leaves room for a partially adapted approach under the principle of proportionality, this should be upheld by the supervisory authorities. It goes without saying that the experience of the BoG’s Regulatory Sandbox in this regard will be valuable.
In parallel with the issuance of the interim report, EA announces the start of a public consultation and invites any interested party to express their views and comments on the Interim Report, participating in the relevant conference-conference to be organized in the first quarter of 2022, and / or submitting his remarks in writing, in the form of a memorandum, to the email address [email protected] until January 30, 2022.
Following the completion and processing of the data that will emerge from the public consultation, the Final Report will be published in mid-2022.
on the special page of the Fin tech industry here
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Source From: Capital
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