On 9 July 2018, the European Parliament, Policy Department A: Economic and Scientific Policy, published a study on Competition issues in the Area of Financial Technology (FinTech) at the request of the ECON Committee.
The study focuses on analysing potential anti competitive factors and their impact both in the FinTech ecosystem as a whole and in concrete services categories. The report highlights that FinTech has come to revolutionise the way in which traditional financial services providers work and interact with their customers. It is changing the dominant paradigms by which traditional financial services are provided, resulting in a significant disruption. In lieu of consensus on a standard classification, the study proposes FinTech services as classified by the following categories:
- (1) Banking —deposits and lending: The main obstacle for the development of a competitive market is not due to existing anticompetitive behaviours in the market, but a lack of clear regulatory standards.
- (2) Payments, Transfers and Forex: Payments are the FinTech services that competition authorities are paying the most attention to. Relevant concerns that could lead to diminishing competition in the provision of payment services include access to critical assets such as data and mobile near field communication (NFC) chips, and the use of an incumbency position gained offline to engage in exclusionary conduct towards competitors.
- (3) Digital currencies: A potential anticompetitive factor is the standardisation of distributed ledger technology (DLT) and other technical protocols. Private or public consortia agreements in relation to technical standards may affect the market entry or have an impact on current costs.
- (4) Wealth and Asset Management: The potential competition challenges in this area involve the fee policies of different service providers, the blurring of boundaries between different types of services (information, advisory, management) and the implications of the use of algorithms.
- (5) Personal Finance: Competition issues regarding digital Personal Finance management (PFM) services arise mainly in the field of customer data access.
- (6) InsurTech: Access to customers’ data and the impact of algorithms on pricing strategies are the main factors that can lead to anticompetitive practices. The standardisation of private blockchains might also create barriers of entry if the standardisation process lacks the required transparency.
- (7) Enabling technologies and infrastructures: There are some specific niches of cybersecurity technologies where market concentration and potential competition concerns might occur. Overall there are no specific competition concerns in technologies.
FinTech is considered to have an enormous potential in improving financial inclusion. FinTech services have the capacity of providing more easily accessible and affordable financial services to large masses of the population and small and medium-sized enterprises (SMEs), especially in the area of credits and payments.
To read the complete study, click here.