Competition Aspects of Digital Financial Services

Abstract

This study 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 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.