The Netherlands Authority for Consumers and Markets (ACM) has launched an investigation into the role of big tech firms in the Dutch payments market.
The aim of the ‘market study’, launched at the request of the country’s finance ministry, is to explore whether US-headquartered corporations such as Apple, Google, Amazon and Facebook, as well as Chinese giants such as Alibaba and Tencent, “are planning on entering” the Dutch payments market. ACM will seek to identify the opportunities for and risks to competition presented by potential penetration of the Dutch payments market by the world’s biggest tech corporations.
Banks’ dominance in payments is increasingly under threat across the globe, a trend driven by changing consumer preferences, technology-enabled innovation and regulatory interventions.
The Netherlands is widely seen as an international frontrunner in embracing fintech. Studies have also shown that the Netherlands has a higher-than-average number of people accessing the internet on mobile devices, fuelling growth in mobile commerce. In respect of digital payments, various innovative payment services have been introduced in the country over the past decade, such as Tikkie, a popular payment app from Dutch bank ABN Amro.
Concerns over big tech entrants
The launch of ACM’s probe follows the implementation, earlier this year, of Europe’s second Payments Services Directive (PSD2) in the Netherlands. One of the high-profile European directive’s aims is to increase competition in the payments industry and bring into scope new types of payment services. The probe also comes as Facebook’s plans for its Libra cryptocurrency face scrutiny and scepticism from European regulators. As well as PSD2 and Libra, further developments forming a backdrop to the ACM study include recent reports that the European Commission is investigating Apple Pay.
Roderik Vrolijk, senior associate in the Amsterdam office of international law firm Stibbe, told Global Government Forum: “Compared to other major European payments markets such as France and Germany, PSD2 as such hasn’t yet brought much ‘new’ disruption in the Netherlands.”
Vrolijk continued: “As digital payment services are widely accepted among the Dutch, people might be more open to solutions offered by new market entrants – and less hesitant to use the a tech company instead of their own bank for the execution of payment transactions. Having said that, I believe that a potential introduction of Facebook’s Libra would be received with hesitation, given the privacy issues that are widely and openly discussed in the Dutch media relating to ‘big tech’, and a shared concern of the government and the people of the Netherlands.”
A spokesperson for the Dutch Banking Association (Nederlandse Vereniging van Banken) told Global Government Forum: “The Dutch market already has a very efficient payment system and is already a mature market. Both for POS [point-of-sale] solutions and online payments. This may make it less interesting to enter the market. On the other hand, this also has an advantage for BigTech: because Dutch people are already so digital [savvy] and there is, for example, a good contactless NFC [near-field communication] infrastructure, such parties can also easily roll out their solutions and quickly gain market share.”
The ACM plans to interview payment experts and will, early next year, survey the biggest tech firms, banks, fintech firms and other market participants. It expects to publish its findings in mid-2020. The main research question is whether big tech companies plan to become ‘active competitors’ in the Netherlands’ payments market, what those plans are, and what impact those plans would have.
ACM says in the announcement of its market study that it is “fully aware that the entry of Big Techs potentially carries anti-competitive risks. Big Techs could use the strong positions they have acquired on one market as leverage to dominate another market. Their presence on or even the mere announcement of entering the payments market could prevent other providers from also entering that market.”
The Netherlands’ Minister of Finance, Wopke Hoekstra, has previously lamented low levels of European investment in future technologies. In a speech in May this year, he said: “We [Europe] are investing very little in the economy of the future. Artificial intelligence, Big Data, nanotechnology and biotech: we are hardly doing anything in these fields. There isn’t a single European firm among the world’s top 15 tech companies. There is no European Google, no European Facebook, no European AliBaba. And there won’t ever be if we don’t change course.”
The Hague-headquartered ACM is an independent regulator charged with competition oversight, sector-specific regulation of several sectors, and enforcement of consumer protection laws.