21st Century Business Herald reporter Chen Zhi Shanghai report With the increasingly close integration of payment and financial technology, the anti-monopoly supervision of relevant departments in Europe and the United States has been strengthened.
Recently, the U.S. Department of Justice is investigating the partnership between the international card organization Visa and large fintech institutions, including whether visa provides cooperation incentives to fintech companies such as square, stripe and PayPal, in exchange for these fintech companies to carry out exclusive cooperation with VISA and carry out payment settlement transactions through visa channels.
"In the view of the U.S. Department of Justice's antitrust investigators, the move has led to an unfair market competition situation." A head of a US financial technology platform pointed out to reporters.
Previously, due to the antitrust investigation launched by the Ministry of Justice, Visa's acquisition of the financial technology platform plaid "died prematurely".
A lawyer familiar with the supervision of the payment field in the United States told reporters bluntly that at present, the US regulatory authorities are particularly concerned about various business cooperation between payment clearing institutions and financial technology platforms, and whether there are signs of business monopoly - including payment clearing institutions based on market advantages and industry positions, which will import a large amount of business traffic into the financial technology platform where there is a cooperative relationship, thereby creating a higher business cooperation effect. But the move puts other fintech platforms at a contrived competitive disadvantage.
"Once the US regulatory authorities find similar signs of business monopoly, they will not only require payment and clearing institutions to terminate their business cooperation with fintech institutions, but also impose huge fines and penalties." He pointed out.
It is worth noting that Rohit Chopra, director of the U.S. Consumer Financial Protection Bureau (CFPB), also asked large technology companies such as Amazon, Apple and Facebook to submit relevant information on how to collect and use consumer payment data to determine whether there are any behaviors that hinder market competition, such as large technology companies secretly setting up customer acquisition barriers for small and medium-sized financial technology institutions through algorithm models and market advantages, so as not to allow the latter to launch business challenges to the former. The move has also resulted in many consumers not having access to cheaper and more efficient fintech services.
The reporter learned from many sources that the payment business of large TECHNOLOGY companies in the United States is currently facing unprecedented strict regulatory pressure. At the end of August, Apple decided to revise the terms of the app store agreement to allow developers to inform users of payment methods other than Apple's ecosystem, which is expected to break the practice of Internet giants such as Apple charging app developers a high commission through monopolistic payment channels, and help the market regulate the development of healthy competition.
Previously, Apple has been criticized by global app developers by forcing app developers to use Apple's own payment channels and collecting about 30% of app revenue commissions, triggering anti-monopoly investigations in Europe and the United States.
A chief representative of the Asia-Pacific region of a large-scale FINANCIAL technology platform in the United States revealed to reporters that with the tightening of supervision in Europe and the United States, the business cooperation between the financial technology platform and large payment institutions in Europe and the United States is also cautious, for fear that related business cooperation will be tied to the "business monopoly" and affect its own business development.
Earlier this year, Visa decided to abandon the acquisition of plaid, a large U.S. fintech platform.
In the eyes of industry insiders, this is the strongest warning voice issued by the US regulatory authorities on the problem of payment and clearing institutions and financial technology platforms joining forces to form a business monopoly.
In early 2020, Visa decided to spend $5.3 billion to acquire Plaid.
According to the data, plaid, as a financial technology company, its main business is to provide API interfaces to financial institutions to assist retail consumers to "directly connect" their bank accounts to other financial services, including the securities investment of Internet brokers such as Robinhood, as well as venmo's multi-party payment system, thereby greatly improving the efficiency and experience of financial service operations.
The head of the above-mentioned US financial technology platform said that plaid's business model actually solves a major pain point in US financial services. In the past, the APIs developed by many banks in the United States did not allow "access" to other procedures, resulting in individual investors in the United States who obtained financial services such as wealth management, securities investment, and asset management outside the banking system, they had to transfer the funds in the bank account to the institutions that provided these financial services first, making the entire financial service operation particularly cumbersome and inefficient. The advent of PLAID has allowed individual U.S. investors to directly enjoy financial services outside the banking system without first "transferring" funds. At present, more than 1/4 of individual investors with bank accounts in the United States have become users of plaid, and this number continues to grow.
"After Visa decided to spend $5.3 billion to buy piaid, financial markets generally believed that Visa had made a good deal." He recalled. If PLAID guides a large number of users to carry out various financial investments, they all carry out fund transfer payments through visa channels, which will undoubtedly continue to increase visa business volume and market share; at the same time, visa's huge user base can also bring plaid a considerable diversion effect, helping the latter business to grow at a faster speed.
However, this seemingly win-win acquisition deal has encountered strong resistance from the US Department of Justice.
Last November, the U.S. Department of Justice launched an antitrust investigation into Visa's acquisition of plaid, on the grounds that Visa, as the "monopolist" of online debit services, charges consumers and merchants billions of dollars a year in online payment fees, and Plaid is developing a low-cost online debit payment method, which, if successful, will further strengthen Visa's monopoly position in the field of Internet debit services and increase barriers to entry for innovators in other payment fields. It also makes it impossible for consumers to obtain lower prices and better services for online debit services.
Faced with an antitrust investigation by the U.S. Department of Justice, Visa decided to cancel the acquisition of Plaid earlier this year.
"This acquisition agreement was cancelled due to antitrust investigations, which has greatly impacted the business cooperation between large payment clearing institutions and fintech platforms this year." The above-mentioned lawyer who is familiar with the regulation of financial technology in the United States told reporters. More and more fintech platforms are worried about business cooperation with payment clearing institutions, which is likely to encounter anti-monopoly investigations by relevant departments, so they have declined the business cooperation invitation of payment clearing institutions. For example, after Visa withdrew the acquisition agreement, Plaid quickly launched a $425 million equity financing and turned to independently develop new bank-connected payment networks and other payment infrastructure facilities to promote rapid business development.
In addition, many U.S. fintech platforms have also declined the offer of acquisitions from large payment and clearing institutions because they are worried that the U.S. Securities and Exchange Commission (SEC) will also conduct anti-monopoly reviews of the acquisitions, resulting in huge regulatory pressure on their business development.
To the surprise of the above-mentioned law firm, the relevant departments in the United States, while strongly preventing Visa from acquiring plaid on the grounds of antitrust investigations, allowed MasterCard inc. Acquisition of Finicity, whose business model is quite similar to plaid's.
The U.S. Department of Justice said Mastercard's share of the Internet debit market is much smaller than Visa's, so the acquisition is unlikely to create a so-called business monopoly effect.
"This also gives U.S. fintech platforms a new standard of judgment when they receive an acquisition or business cooperation offer from a large payment clearing institution." He pointed out. The former will implement a due diligence exercise – if the business cooperation and acquisition investment do not involve the strengths of the payment clearing institution, the antitrust regulatory pressure may be much smaller.
Compared with the increasingly stringent antitrust investigation pressure of large payment clearing institutions to acquire fintech platforms, the payment channels of large US technology companies are not having a good time.
At the end of August, Apple decided to revise the terms of its app store agreement, which would allow developers to inform users of payment methods other than the Apple ecosystem.
Behind this is that Apple's previous practice of charging high commissions to app developers through monopoly payment channels has been strongly opposed by more and more countries.
Last year, the Dutch Consumer and Market Authority (ACM) pointed out that some smartphone manufacturers only allow their own payment apps to connect to the NFC function, invisibly sacrificing market innovation and restricting the freedom of choice of consumers and merchants.
In May, a British law firm represented about 20 million British Apple mobile phone users in a lawsuit against Apple, accusing it of charging up to 30 percent of its high revenue to non-IOS developers, allegedly hampering potential market competition.
At the end of August, South Korea's parliament amended the Electrocomm Services Act to prohibit major app store platforms such as Apple and Google from forcing software developers to use their payment systems and charge commissions of up to 30 percent.
"In the face of more and more countries taking countermeasures, Apple can only open third-party payment channels in exchange for its own business expansion space in these countries." The chief representative of the Asia-Pacific region of the Aforementioned US financial technology platform pointed out. Recently, another US technology giant, Google Play, a payment channel owned by Google, also plans to allow Android program developers to pay through third-party systems, but Google Play will still charge commissions to developers, and the profit commission will drop to about 4%.
The reporter learned that although apple, goolge and other technology giants choose to open third-party payment channels, they can still use algorithm models and disguised subsidies to attract app developers and consumers to use their own payment channels, and minimize the business impact caused by anti-monopoly policies.
"Compared with restricting consumers and merchants from using other payment channels through models such as reducing fees, algorithmic models and disguised subsidies are more hidden, which will also become a major focus of the anti-monopoly investigation of large technology companies' own payment channels in the future." Lawyers familiar with U.S. fintech regulation pointed out that the U.S. Consumer Financial Protection Agency (CFPB) currently requires tech giants such as Apple, Amazon, PayPal to disclose how their own payment networks operate and submit information about how they collect and use consumer payment data, in part to track and investigate whether these tech giants continue to take artificial containment measures against market competitors through algorithmic models or other disguised subsidy practices to consolidate their business monopoly positions.
"In particular, if technology giants continue to use the closed-loop and algorithmic models they have built to make huge profits for their own payment systems (and hinder other market competitors from obtaining customers in a fair way), they are bound to encounter stricter regulatory measures." It is not excluded that the relevant departments may force the technology giants to split off the payment channel business. He analyzed. At present, the regulatory game against technology giants monopolizing payment channels is escalating - since this year, AMERICAN technology giants have tried their best to persuade the government to block the relevant business splitting practices, but who can laugh in this struggle to the end is still unknown.
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