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Ensuring Competition in Payments

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2012/04/19
Zilvinas Bareisis
Last Friday, the European Commission announced that it has extended its investigation into Project Oscar, the proposed mobile payments joint venture from a group of UK telcos. The regulator is concerned that the venture could be anti-competitive. Project Oscar is a JV between Vodafone, Telefonica and EverythingEverywhere (Orange and T-Mobile) to develop an infrastructure which would enable mobile payments as well as other mobile services, such as couponing, loyalty, etc. As required, they submitted their plans to the EC for approval last month and after the inital review period ended, the Commission decided to extend its investigation for another 90 working days. This week I received a lot of enquiries about what this means. Does this kill mobile payments in the UK before they even take off? Will this have implications for other similar JVs? Indeed, a similar partnership in The Netherlands known as Sixpack also had to delay their launch plans as they went to seek the EC approval. And in a different area of payments, I heard that the interoperability pilot between the three existing OBeP schemes (EPS, iDEAL and Giropay) is also being stopped by the European Commission investigation into allegations of anti-competitive behaviour by the European Payments Council, which commissioned the pilot. However, I wouldn't read too much into this at this stage. To me, the latest UK announcement simply implies that:
  • Payments regulation is complex and there are many issues to consider when approving new entities, especially in new and unfamiliar territories, such as mobile infrastructure;
  • The regulator is not willing to make rushed decisions and is prepared to take an in-depth look at the new venture;
  • Three, another UK telco, has likely done a good job at raising their concerns about being excluded from this partnership so far.
My view is that all the regulators around the world should keep in mind three primary objectives of payments regulation:
  1. Protecting the parties conducting a payment transaction, i.e. consumer and merchant protection;
  2. Fostering competition and ensuring a level playing field among payment service providers;
  3. Managing systemic risk and ensuring security, soundness and stability of the overall economy.
By taking its time to review the proposals, the regulator is only fulfilling its obligation around the objective #2. Lets wait and see what the decision is at the end of August.

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