French watchdog says banks risk “marginalisation” by Big Tech payment apps

France’s antitrust watchdog thinks traditional banking players risk “marginalisation” by Big Techs’ payment apps.

The Autorité de la concurrence issued an opinion yesterday on the state of competition across its fintech sector. The 127-page document follows a one-year inquiry into new payment technologies.

But instead of reigning down on fintech start-ups, the regulator weighed in on Big Techs – echoing a sentiment expressed by others in Europe.

The paper focuses on Big Tech-associated threats to competition.

European Central Bank (ECB) executive Fabio Panetta said last year that “the global tech giants – the so-called Big Techs – are aiming for a revolution in the payments landscape and represent a threat to traditional intermediation.”

Now France’s antitrust watchdog is chiming in, highlighting the “competitive risks linked to the strengthening of the market power of large digital platforms”.

It says, “the locking of consumers into an ecosystem” like Apple’s or Google’s incurs the “risk of marginalisation, in the long term, of traditional banking players”.

“Technical mastery”

The Big Tech payments “phenomena”, as the regulator calls it, refers to “Apple Pay, Google Pay, Amazon Pay in particular”.

“This development seems particularly significant, because platform-type actors have considerable advantages to assert,” it continues.

These include the ownership of “ecosystems based on large communities of users”. As well as “access to large data sets”, and “the technical capacity to put them to good use”. Later in the document, the regulator calls this their “technical mastery”.

The French antitrust watchdog also acknowledges Big Techs’ “considerable financial power”. It argues this allows them to make significant investments in new technologies, therefore facilitating the faster development of their payment solutions than other market players.

Apple, Google, and Amazon all sit at more than $1 trillion valuations. According to Statista, HSBC is the bank with highest asset numbers in Europe at €2.4 trillion, followed by BNP Paribas at €2.2 trillion.

All the profit, none of the work

Big Techs have long piggy backed off the traditional financial system and pocketed the majority of the profit in the process, according to the French watchdog.

“By relying, for the realisation of the payment, on the traditional banking actors and the groups of bank cards, the large platforms have the capacity to draw significant profits.”

The regulator also mentions fintech start-ups’ reliance on the universal banking model. “[It] makes it possible to provide certain services deemed ‘unprofitable’ if they are offered in isolation, such as depositing and cashing checks and cash.”

But the emphasis of the paper remains in large part on Big Tech-associated threats to competition.

With players like Amazon and Google facing “lower marginal costs than traditional banks”, they’re able to offer their payment solutions “free” to consumers, it continues.

And being closed ecosystems, the regulator raises the competition issue of near field communication (NFC) – or contactless – access on branded smartphones.

“The pre-installation in certain phones of mobile contactless payment solutions, or the implementation of ergonomic shortcuts facilitating access to a given solution, could present risks for the competition.”

Apple Pay is currently under regulatory scrutiny from the European Commission for this. Apple Pay, launched in 2014, is the only mobile payment service allowed to use the “tap and go” functionality on iPhones.

The French regulator cites the European Payment Initiative (EPI) on a continent-wide level as a solution to Visa’s and Mastercard’s dominance. But it doesn’t propose a solution for Big Tech dominance.

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