The technological transformation that has been disrupting financial services has only been accelerated by the challenges mounted by the COVID-19 crisis.
Financial institutions have needed to adapt internal and external processes rapidly in order to maintain and enhance online services during the pandemic, as well as respect public fears of the virus spreading through cash transactions.
Pre-crisis, the industry was also seeing competition intensify with, among other things, large digital payment solution platforms such as
These changes represent challenges and opportunities for industry players across the board. While most of these developments will naturally require individual responses from financial institutions, there will also be circumstances where the most efficient, innovative, and pro-competitive outcomes will involve competitor collaborations to ensure customers get the benefit of technology faster and more broadly.
In the wake of the pandemic crisis, issues continue to evolve, and increasingly, antitrust authorities are being asked to expand their market scrutiny and enforcement action.
As the financial services industry charts the course ahead, including to address collaboratively public safety concerns (at a minimum), and what platforms or standards may need to be developed to respond to a more digital and competitive market, industry players can look to lessons learned from two important cases: the Interac and
Lessons from Interac and
The Interac experience
The lesson of Interac is to avoid potentially becoming a victim of your own industry success and seek instead to establish, from inception, open and non-discriminatory platforms. This will help shape the proper commercial investment framework for participants as well as mitigate the risks of anti-competitive harm and competition enforcement.
In 1996, in the wake of its initial success and adoption, Interac was forced to sign a consent agreement that opened up the Interac network beyond Interac's charter members and established Interac as an open and non-discriminatory platform.
As access to the Interac platform became essential in the industry, the consent agreement removed what the
It took almost 25 years to see Interac finally released from the costly burden of consent agreement compliance. Had Interac been designed as an open and non-discriminatory industry platform from the outset, arguably, much of this burden could have been avoided.
The
The lesson of the past decade's
As recently as June in the
Again, if many of these platform fees and service-term decisions had been made by an independent committee or in a clean team structure, competition risks could have been mitigated.
Enforcement in the new world
Financial services are at the heart of the digital transformation of the economy for consumers and businesses alike, especially as we continue to deal with the implications of the COVID-19 crisis. In this new world, issues are evolving and are often unexpected, and legislation is not keeping up. Increasingly, antitrust authorities are being asked to fill this gap, expanding their market scrutiny and enforcement action.
But as the saying goes, an ounce of prevention is worth a pound of cure: applying past lessons learned, including those of Interac and
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