France’s competition agency has concluded an investigation into banks, Big Tech and the financial technology (FinTech) sectors, with a warning that vigilance is needed due to “significant changes in the payments sector, characterized in particular by the arrival of major digital platforms.”
The competition agency said there is “the risk of marginalization, in the long term, of traditional banking actors.” The agency pointed to newer technologies — such as cloud computing, contactless payment and blockchain — as notable developments. In response, French banks are adapting to the new digital ecosystem by investing in FinTechs along with their own research and developments. Also, banks have struck deals with Big Tech.
The probe, which started in January of last year, concluded that “technological innovation and regulatory changes have allowed the arrival in the payments sector of new players, FinTechs and Big Techs, who have developed, alongside traditional banking players, innovative payment methods for consumers, and new diversified services” for businesses.
The Autorite de la Concurrence said that one of the big changes has been the emergence of Big Tech platforms in the payments sector, such as Apple Pay, Google Pay and Amazon Pay. The report said these companies have not been subject to the same regulatory constraints as traditional banks. Now, the European Payments Initiative “should finally make it possible to create a pan-European payment system that could connect banks to each other without using current networks, such as Visa and Mastercard.”
For his part, J.P. Morgan Chase’s CEO Jamie Dimon warned the industry this month that banks are facing a slew of competitive challenges from tech-nimble, non-traditional financial services players. “Banks are playing an increasingly smaller role in the financial system,” Dimon wrote in his annual shareholder’s letter. He noted that traditional financial institutions (FIs) have become smaller relative to the U.S. financial markets, and added that there has been a marked growth in payment and FinTech firms, while Big Tech has reached an “extraordinary size.” Dimon also warned that the industry’s traditional products, such as payments and certain forms of deposits, are leaving the banking system.
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