More than a decade after the global financial crisis, regulators in Europe and the United States are once again on alert because some of the financial system’s core firms are too big to fail.
This time, however, it is not banks that are causing concern in the US and Europe. The companies in the spotlight this time are tech giants such as Google, Amazon and Microsoft. Today, regulators are concerned that more and more banks, insurance companies and markets are using these companies’ vast cloud-based internet platforms.
With the increasingly close integration of payment and fintech, the antitrust supervision of relevant authorities in Europe and the United States has been strengthened.
At present, many countries around the world have adopted a series of measures such as legislation and law enforcement to strengthen the anti-monopoly supervision of Internet platforms. Among them, the United States and the European Union are in the forefront of regulation.
In recent days, the U.S. Department of Justice is investigating Visa’s partnership with major fintech companies, including Visa’s incentives for financial technology companies such as Square, Stripe, and PayPal, in exchange for exclusive cooperation with Visa to conduct payment processing transactions through Visa channels.
Visa decided earlier this year to withdraw its purchase of Plaid in the face of an antitrust investigation by the U.S. Department of Justice.
In the eyes of industry insiders, this is the strongest warning from U.S. regulators against combining clearing houses and fintech platforms into a business monopoly.
The retail payments market is a classic example of big tech entering the financial system. Once a tech company has established a key user base, its user base grows rapidly. The growth in user numbers can also be amplified by mergers and acquisitions, in which case smaller potential competitors are absorbed into the service ecosystem around the large technology platform.
In fact, financial regulators are increasingly wary of Google, Apple, Amazon and other fintech giants’ foray into the financial sector, arguing that they pose risks to the stability of the financial system. Because fintech giants sought to solve the payment problem first, but did not submit to the most restrictive rules, they have taken their first steps in the field that are very different from those players in history.
These fintech giants continue to grow and become monopolistic. U.S. stock market values have shown that most of the tech industry’s profits come from the largest companies at the top.
On the one hand, fintech giants have huge amounts of user data that can use data advantages to improve the quality of their products or services, or use their platform advantages to compete unfairly with small and medium-sized businesses. On the other hand, these companies are using their user advantage to erect barriers, block innovation and hurt consumers.
The payments business of America’s largest technology companies is under unprecedented regulatory pressure.
As government regulation is becoming stricter, fintech platforms are also being cautious in their business cooperation with large payment institutions in Europe and the US, for fear that the relevant business cooperation will be held as a “business monopoly” and affect their business development.
The payment channels owned by big US tech companies are also struggling as big payment clearers come under increasing antitrust pressure over their acquisition of fintech platforms.
In late August, Apple decided to change the terms of the App Store agreement, which would allow developers to inform users about payment methods other than Apple’s ecosystem. The move is expected to break the practice of Apple and other Internet giants monopolizing payment channels to charge APP developers high commissions, and promote the development of healthy competition in the market.
Google Play, another U.S. tech giant, also plans to allow Android developers to pay through third-party systems, but Google Play still charges developers a commission and profits drop to about 4 percent.
Although Apple Inc., Google and other technology giants choose to open third-party payment channels, they can still attract APP developers and consumers to prefer their own payment channels through algorithm models and disguised subsidies, and minimize the business impact brought by anti-monopoly policies.
The U.S. Consumer Financial Protection Bureau (CFPB) is currently requiring apple, Amazon, PayPal and other tech giants to disclose how they operate their own payment networks and submit information about how they collect and use consumer payment data. The CFPB is tracking whether these tech giants use algorithmic models or other forms of subsidy. Continue to take artificial containment measures against market competitors to consolidate their business monopoly position.