Page 169 - ITU-T Focus Group Digital Financial Services – Technology, innovation and competition

ITU-T Focus Group Digital Financial Services
Technology, Innovation and Competition

Executive summary

This report enumerates a sampling of competition issues stemming primarily from access to, and the use of
technology in, the digital financial services (DFS) ecosystem from the perspective of its stakeholders.

Stakeholders include regulators, technical service providers and aggregators, payment switches, agent
networks, mobile network operators (MNOs), independent banks, payment service provider (PSP)-affiliated
banks, MNO-affiliated banks, MNO-affiliated PSPs, mobile virtual network operators (MVNOs), and independent
PSPs.

Market imbalances may result from unequal policy frameworks or from market conduct. The former may be
from regulatory bans on or restricted access to: DFS ecosystems; disproportionate and unequal compliance
and capital requirements; and inconsistent and disproportionate tax regimes. The latter could relate to a
market participant’s access to fair reasonable and non-discriminatory (FRAND) terms to technology; critical
and scarce infrastructure, services used for channel or wholesale access, discriminatory pricing of services,
cross-subsidization of services, quality of service, and access to big data.

The report outlines competition issues that have been identified by the author based on publicly available
and ventilated examples and studies of DFS ecosystems worldwide, as of January 2017. Insights from market
participants, analysts, and regulators participating in the ITU Focus Group on DFS and externally are also
included.

Regulatory capacities and potential types of interventions to deal with these and other related competition and
market balance concerns are detailed, as are the technical and commercial methods that have been employed
by market participants to deal with competition-related issues in the absence of regulatory intervention.

Country examples are from: Bangladesh, China, Colombia, Georgia, Ghana, India, Jordan, Kenya, Malawi,
Mexico, Nepal, Nigeria, Pakistan, Peru, Philippines, South Africa, Sri Lanka, Tanzania, Uganda, Zambia, and
Zimbabwe. In some instances, multiple competition-related issues in the DFS ecosystem in a country may
manifest.

As a pure information resource for the DFS Focus Group, this study does not make any conclusions or
recommendations as to how the issues described may be approached or resolved.

Approach

For those not necessarily familiar with competition policies and laws, this study does not employ classic
competition categorizations found in the literature and academic works for ease of reading. Indeed, there are
1
tensions and complexities in applying traditional competition precepts and terminology designed for traditional
(and often) physical products to digital ecosystems, such as DFS.
2
Hence, instead of defining competition issues as per the ‘vertical’ or ‘horizontal’ terms of art usually employed
– which includes defining a ‘market’ - this study instead uses a functional (descriptive) approach to categorizing
3
the identified or potential competition issues. It similarly uses an evidence-based approach to determine what
issues have risen to a level of concern for entities and regulators, and how these have been dealt with – or
not, as the case may be – either through market dynamics and/or regulatory intervention.

1 The short competition law primer in Annex A provides further details.
2 This tension in application was noted in a competition report by the GSMA. See GSMA (2016a) ibid; and Concurrences (2016)
ibid.
3 There are various approaches to defining a market, the methods of which are beyond the scope of this paper. Briefly, a market
definition is a tool used by regulators to identify and define the boundaries of competition between entities so as to establish
the framework within which competition policy principles can be applied. This may identify in a systematic way competitive
constraints that market participants face. For example, some regulators employ the ‘Hypothetical Monopolist Test,’ also known
as the SSNIP (Small but Significant and Non-transitory Increase in Price) test. See further Concurrences (2016) Glossary, available
at https:// goo. gl/ nR9pPK, and GSMA (2016a) Resetting Competition Policy Frameworks For The Digital Ecosystem, available at
https:// goo. gl/ YHBMxv

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