Page 175 - ITU-T Focus Group Digital Financial Services – Technology, innovation and competition

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

‘hotspots,’ coupled with a belief that ex ante ‘regulatory activism’ is a quick fix in any market, but without
11
recognizing the radically different market competition and context for DFS. Similarly, the competition issues
12
outlined below may be representative of market dynamics in a particular country, and may not necessarily
be a global trend.
13
Importantly too, the market conduct and competition issues raised in a particular jurisdiction, and which are
enumerated below, may or may not actually breach national competition law and/or related competition
provisions of sectoral legislation. This ultimately must be decided by the relevant regulators or competition
authorities on a case-by-case basis after a full market review and analysis. In this respect, it should be noted
that certain behavior which is acceptable for a market player with an insignificant market power could actually
be considered a breach of competition law if undertaken by an entity with substantial market power (SMP). It is
the responsibility, however, of regulators or competition authorities to make such a determination, if required.

MNOs and other non-banks may also have their own competition-related concerns, particularly with regards
to market access and licensing, access to national payment systems, and proportionality of regulations that
may affect them. In particular, incumbent banks and payment switches required for the integration of POS
systems and for interoperability have often been accused of restricting access to critical financial and banking
infrastructure to potential DFS competitors such as MNOs and non-banks. These issues and concerns are
described in full below. 14

From the perspectives of all market participants, there may also be cases of regulatory overreach in relation
to market imbalances. As noted by the Consultative Group to Assist the Poor (CGAP), this may run counter
to a key guiding principle for regulation: That the remedy for harmful conduct should be the least restrictive
available to achieve the intended objective and should be proportionate to the extent of risk. The intervention
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should therefore be justified by the risk to market evolution of anti-competitive behavior; the higher the risk,
the stricter the rules that comprise the intervention.
Although not exhaustive, the study captures a number of countries where competition issues relating to the
DFS ecosystem have been found to be manifest. It outlines the genesis of competition issues by the type of
issue or market conduct that may have raised market opprobrium and regulatory focus or ire, and provides
examples within different countries of how these issues have manifested and been dealt with by market
dynamics and/or through regulatory intervention.

2 Approaches to competition issues

From the country evidence detailed below, many of the classic vertical and horizontal competition issues and
behaviors outlined in Annex A may map to the DFS ecosystem.

11 See Section 3.2.
12 Indeed, in a number of markets using USSD and STK for DFS purposes, market forces have sufficed to ensure that no regulatory
intervention has been required.
13 The sense then from some is that focus on MNOs and provision of access is disproportionate to the scale and extent of the
challenge in providing access to DFS, given the number of markets in which USSD and STK is being provided where commercial
arrangements have been agreed on.
14 Any competition-related concerns of MNOs and other non-banks are also described below.
15 CGAP (2014) Mobile Payments Infrastructure Access and Its Regulation: USSD, available at https:// goo. gl/ IBu4sJ. In the context
of sharing USSD, a least restrictive rule, notes CGAP, will be one that minimizes risk of anti-competitive behavior without putting
unnecessary restrictions on MNOs. For example, banning MNOs from the mobile payments market is more restrictive than a
regulation mandating USSD access. Other examples may include setting price caps or floor prices for bearer access.

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