Competition & DFS Working Papers

Nov 22, 2019

1. Modularization of DFS and Competition Issues

Digital financial services (DFS) have been modularized through the rise of digital e-commerce superplatforms and the ascent of fintech firms, and this modularization leads to specific competition issues and regulatory distortions. This working paper identifies the main competition issues that could arise in each step of the DFS value chain, providing historical examples in emerging markets where relevant.

This paper is part of a series of working papers that investigate competition issues in DFS. Drawing on both experience and research, these papers provide regulators and stakeholders alike a solid framework for understanding how competition policy, regulation and behavior by market players can affect the level playing field of DFS in emerging markets.

2. Lessons Learned from the Interchange Fees Antitrust Investigations

The recent investigations in the EU and US into interchange fees and associated scheme rules can provide valuable lessons for how to construct and design interchange fees. This working paper summarizes the main interchange fee cases in these jurisdictions and identifies key lessons for payments and mobile money in developing markets.

This paper is part of a series of working papers that investigate competition issues in digital financial services (DFS). Drawing on both experience and research, these papers provide regulators and stakeholders alike a solid framework for understanding how competition policy, regulation and behavior by market players can affect the level playing field of DFS in emerging markets.

3. Digital Data and Competition Issues

The rise of digital data creates both social benefits as well as competition issues. Data has been leveraged to create entire industries and render others more efficient and cost-effective. Yet the network effects of digital data can also contribute to market power, potentially favoring anti-competitive outcomes. This working paper examines the particular competitive issues that arise in regard to digital data and digital financial services (DFS) and explores how authorities in mature economies have dealt with these competition issues in an effort to distill lessons for developing markets.

This paper is part of a series of working papers that investigate competition issues in DFS. Drawing on both experience and research, these papers provide regulators and stakeholders alike a solid framework for understanding how competition policy, regulation and behavior by market players can affect the level playing field of DFS in emerging markets.

Fair Play: Ensuring Competition in Digital Financial Services

In many emerging economies, digital financial services markets are limited to one or two major providers, reducing innovation, customer choice and potentially facilitating monopolistic or cartelistic behavior. Why are DFS markets prone to concentration? Is this a problem? In this primer, CGAP applies a framework to help answer these questions and demonstrate how regulation can have a substantial impact on competitive dynamics in the DFS marketplace. The paper also proposes regulatory levers that policy makers can use to promote more competition. Looking ahead, a competitive landscape becomes especially important given the rising importance of customer data and the entry of large, multinational technology companies into DFS markets.

The argument for robust and fair competition is persuasive. Competition serves customers by promoting innovation and efficiencies, which lead to lower prices, greater choice, better quality services and improved products. At a national level, competition can curb excessive concentration of economic power and potentially reduce operational risks from service outages. From a financial inclusion perspective, more competition also increases the likelihood that DFS will reach low-income people currently excluded or poorly served by the financial sector. Read more in CGAP's new primer in collaboration with BFA 👉 bit.ly/2QLYWSe