Concerns raised over card schemes acquiring “potential competitors”

By Emma Olsson | 29 January 2020

Competition concerns are being raised over Visa and Mastercards’ acquisitions and investments as the two major card schemes become increasingly involved in fintech development.

“I don’t find it at all comforting when Mastercard and Visa announce programs to ‘help’ fintech,” said Bob Lyddon, chair of the Association of UK Payment Institutions, at the Westminster Business Forum’s Payments policy and regulation conference in London last week. During a panel, Lyddon said the card schemes’ fintech programs were an attempt to enclose a threat.

“It’s a forward integration, a move to reduce the power of the new supply because they’ve become part of the control in the market…and I think that should be a competition issue, as to whether that should be allowed.”

Also on the panel was Jill Docherty, head of business development at Visa, UK and Ireland, who declined to comment on Lyddon’s accusations at the time.

Both Visa and Mastercard were unable to comment by time of publication. Mastercard noted that it does not generally share its investment strategy publicly.

“It’s not just about bashing Visa or Mastercard, it’s a call for more effective regulation,” said Mark Falcon, director of economic advisory firm Zephyre, during the panel.

“One of our conditions is that there should be a presumption against dominant firms acquiring prospective competitors, particularly those new start-ups that are going to be potential competitors of the future.”

The card schemes have doubled down on fintech investment and acquisition in the past year. Earlier this month Visa announced its $5.3bn acquisition of Plaid, the fintech powering Venmo and Betterment. Mastercard made its largest fintech acquisition to date in August 2019, buying payment platform Nets for $3.19bn. In November, Mastercard announced its Fintech Express program in Asia Pacific, following its US Mastercard Accelerate program announced in October. Similarly, Visa’s Fintech Fast Track program went live in July.

In another large-scale investment, cross-border payments company Currencycloud secured $80m in funding on January 27 from institutions including Visa, who partnered with the company earlier this year. Visa’s senior vice president and treasurer Colleen Ostrowski is set to join Currencycloud’s board.

Todd Latham, chief growth officer at Currencycloud, said he believes innovation thrives in competition.

“No one business has the full answer, as the end customer use cases will always be diverse,” he said in an email, stating that the payments industry will remain competitive.

“This will become ever more intense as payments become embedded into various consumer and business ecosystems, and the payment itself becomes a hidden background activity. Because of this, there will remain a substantial amount of competition at the infrastructure level. The card networks will compete with many players, whether that be local schemes, SWIFT, or payment platforms like Alipay or WeChat from China. This is supported by growth figures from all of these businesses, which continue to outstrip global GDP as increasingly payments move from cash to become electronic. The ultimate winner here is the customer who gets a better product at a reduced cost.”

Yet antitrust remains a concern for Visa and Mastercard; the UK Supreme Court is currently hearing appeals on their exemption from competition law over their interchange fees. Antitrust claims have previously been leveraged over payments, including an EU investigation that closed in April 2019. No investigation specifically into fintech acquisition or investment has been reported.

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