Introduction

On December 3, 2018, the Dutch Authority for Consumers & Markets (“ACM”) published a speech from its board member, Cateautje Hijmans van den Bergh, regarding potential competition law concerns in the financial technology (“FinTech”) sector.

In particular, further to the European Parliament’s study on FinTech and competition law (the “Study”) – as discussed in a previous blog post – Hijmans van den Bergh voiced concerns regarding potential FinTech foreclosure, following the adoption of Technical Standards. She also provided some guidance regarding access to essential inputs held by firms in the sector.

PSD2 and access to information

Under the EU Directive on EU-wide payment services (“PSD2”), banks should allow third parties access to payment information, if the customer allows it. As a consequence, FinTech firms can access information held by banks, in order for those firms to offer their services. This access has been considered important to increase competition and innovation in the financial sector. According to the Study, this offers benefits to consumers, such as cost reduction, greater choice, improvements in efficiency, greater transparency and increased financial inclusion.

Hijmans van den Bergh explained that reaching these benefits is also in line with ACM’s mission: creating opportunities and options for businesses and consumers. To achieve its mission, the ACM has several powerful instruments, such as competition law, which they apply in coordination with regulations, e.g. the PSD2.

Technical standards and competition law

In her speech, Hijmans van den Bergh stated that there has been a lot of discussion about the type and design of information access that banks need to provide to FinTech. In this regard, the PSD2 and the Regulatory Technical Standards provide some guidance, and several EU working groups have been working on it.

From a competition law perspective, she explained that competition law is in favour of the creation of technical standards to enable FinTech access to information. The clear limit to standardization is that it cannot lead to market foreclosure. Moreover, all interested parties need to participate in the standard setting process, and no single standard can be imposed.

Hijmans van den Bergh further explained that competition law provides a clear framework regarding access to an essential input that a new competitor might need: access needs to be provided in an open, transparent and non-discriminatory manner.

Guidance to prevent foreclosure

In relation to the implementation of PSD2 and potential foreclosure by banks, Hijmans van den Bergh set out three guiding principles:

  • New competitors should be involved in any standard-setting process. To prevent the risk of foreclosure, the key question should be what kind of access new competitors need in order to innovate and compete.
  • Banks should be flexible and look beyond the current market situation, as the market is constantly evolving and the type of access might change over time.
  • Banks should not be allowed to offer one type of access exclusively to one party, and thereby exclude others. This includes alternative types of access or other arrangements with third parties that are partly or wholly owned by banks, or with new competitors that they consider ‘preferred’ counterparts.

Conclusion

Hijmans van den Bergh explained that standards and competition can go hand-in-hand as long as the criteria regarding access to essential inputs are respected. Therefore, she would assert that new competitors should be included in any discussion or decisions regarding access as an ongoing effort. Moreover, new competitors cannot be refused on the basis they would need another type of access compared to access provided to current competitors.

She emphasized the ACM’s role in helping new competitors and upcoming technologies to make the market work better. She concluded that, in the coming months, the ACM will want to focus on competition and innovation barriers that new competitors and technology might encounter, and that the ACM will be monitoring the possible emergence of dominant players and potential for abuse.

Photo of Mike Nonaka Mike Nonaka

Michael Nonaka is co-chair of the Financial Services Group and advises banks, financial services providers, fintech companies, and commercial companies on a broad range of compliance, enforcement, transactional, and legislative matters.

He specializes in providing advice relating to federal and state licensing and…

Michael Nonaka is co-chair of the Financial Services Group and advises banks, financial services providers, fintech companies, and commercial companies on a broad range of compliance, enforcement, transactional, and legislative matters.

He specializes in providing advice relating to federal and state licensing and applications matters for banks and other financial institutions, the development of partnerships and platforms to provide innovative financial products and services, and a broad range of compliance areas such as anti-money laundering, financial privacy, cybersecurity, and consumer protection. He also works closely with banks and their directors and senior leadership teams on sensitive supervisory and strategic matters.

Mike plays an active role in the firm’s Fintech Initiative and works with a number of banks, lending companies, money transmitters, payments firms, technology companies, and service providers on innovative technologies such as bitcoin and other cryptocurrencies, blockchain, big data, cloud computing, same day payments, and online lending. He has assisted numerous banks and fintech companies with the launch of innovative deposit and loan products, technology services, and cryptocurrency-related products and services.

Mike has advised a number of clients on compliance with TILA, ECOA, TISA, HMDA, FCRA, EFTA, GLBA, FDCPA, CRA, BSA, USA PATRIOT Act, FTC Act, Reg. K, Reg. O, Reg. W, Reg. Y, state money transmitter laws, state licensed lender laws, state unclaimed property laws, state prepaid access laws, and other federal and state laws and regulations.

Photo of Sophie Bertin Sophie Bertin

Sophie Bertin is a senior advisor to Covington in their Financial Services and Antitrust practice. Her current focus is on financial services topics, ranging from State aid, implementation of regulations, interplay between various regulations, including the new data protection rules; as well as…

Sophie Bertin is a senior advisor to Covington in their Financial Services and Antitrust practice. Her current focus is on financial services topics, ranging from State aid, implementation of regulations, interplay between various regulations, including the new data protection rules; as well as the impact of new technologies (like Blockchain) on the financial services business models and resulting competition challenges.

Sophie has over 20 years of professional experience and she has broad experience helping banking clients on their strategy, restructuring, reorganization, risk management, regulatory and compliance, back-office operations and automation, as well as, advising on various issues around banking regulation and competition law (most notably State aid).