ACPR fears BigTech more than FinTech

FACTS

• The rise of FinTech is rocking the boat. Beyond the predicted revolution of the financial market, the French Competition Authority identifies specific points of vigilance, notably concerning the hegemony of the GAFAs.

• The ACPR wanted to evaluate, with a survey, the competitive context in the financial technologies sector and, more specifically, in the payment area.

• This abundant context has led to the emergence of new means of payment recognized by the Banque de France; the archetype of this new wave being materialized by crypto-assets.

• This market study has allowed to confirm the driving role of FinTech and GAFA in terms of innovation for payment and financial services.

• However, the Authority also highlights a major risk: that of the domination of GAFAs may keep the consumers captive in a closed ecosystem which could generate competitive risks in the financial sector. The traditional banking might remain stuck in operational activities.

CHALLENGES

• Putting FinTechs in their rightful place: Previously considered as troublemakers in a well-established market managed by the historical players, Fintechs were then presented as potentially dangerous competitors. However, the situation is far from being so simplistic according to the ACPR. FinTechs have indeed captured market share, but they have also participated in a necessary renewal of all financial services, notably in the framework of projects conducted jointly with the banks themselves. The agility of some offsets the inertia of others.The digital transition and the integration of new technologies is still ongoing, paving the way for ever more relevant financial services.

• Identifying the real threat: As the ACPR points out, FinTechs are not so much a threat as GAFAs. The latter's strike force and their ability to capture consumers in closed ecosystems are a real risk. Moreover, if governments try to curb their ambitions, they will not be able to hold back the steamroller that the GAFAs represent for long. The ACPR also identifies Blockchain technology, which holds the promise of disrupting intermediaries and automating all payment processes and information exchanges in general.

MARKET PERSPECTIVE

• The ACPR recently penalized young payment institutions by asking them to stop presenting themselves as "neo-banks." To protect users and to make sure to distinguish players with a credit institution license from those who only have a payment institution or EME license.

• The web giants are American or Chinese. But their domination and coverage of services is global and affects European consumers as well. The latter remain protected by specific local regulations such as GDPR or PSD2, which apply to all on the national territory.

• On the other hand, Europe is seeking to protect its sovereignty by developing a global payment service. The EPI project is thus presented as the spearhead of an efficient strategy for the future, which is based on the central role of banks.