Irish Payments Collaboration Comes Up Against Regulator Scrutiny

December 10, 2021
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A new mobile payments platform being developed by Ireland’s top banks has come up against a barrier, with the country’s antitrust watchdog announcing a new investigation.

A new mobile payments platform being developed by Ireland’s top banks has come up against a barrier, with the country’s antitrust watchdog announcing a new investigation.

The Competition and Consumer Protection Commission (CCPC) has decided to carry out a full Phase 2 investigation into a proposed new interbank mobile payments company, Synch Payments DAC.

This throws the prospect of the planned early 2022 launch for mobile app Yippay, which Synch is developing, up into the air.

Synch is a joint venture company, owned by Allied Irish Banks, the Bank of Ireland, Permanent TSB and KBC Bank Ireland.

More than €5.9m has been raised to fund the project so far, according to a filing with the Companies Registration Office that was made in November.

The banks’ plan is to create a new, industry-wide open payment service for Ireland that can be used by all financial institutions that issue euro-denominated IBANs to Irish customers.

“Following an extended preliminary investigation, the CCPC has determined that a full investigation is required in order to establish if the proposed transaction could lead to a substantial lessening of competition in the State,” the authority said in a press statement.

Going forward, the CCPC has confirmed that it will publish its Phase 1 determination no later than 60 working days after the date of the determination, as well as allowing the parties involved the opportunity to request that confidential information be removed from the published version.

With many reports claiming that the new joint venture is being used by Ireland’s high-street banks as a method to compete with the likes of Revolut, Stripe and N26, the plan has unsurprisingly come up against opposition from the fintech world.

Earlier in April this year, the Electronic Money Association sent a strongly worded letter to the competition authority to further investigate.

“At this early stage, we cannot support the JV. We consider that there is insufficient information available at this stage to determine the competitive effect on the wider industry,” the trade association, which represents the likes of PayPal, Revolut, and Stripe, wrote.

In particular, they lobbied the CCPC to look at issues ranging from barriers to entry, as well as the impact on competition and innovation at the EU level, not just in Ireland.

“The Commission must determine if Synch accords with values represented by EU payments regulation and expressed by the European Commission; whether Synch will innovate and create technology to give effect to the European Commission’s strategy or if Synch will rely on outdated technology and develop very little,” the letter said.

Bank Collaboration and Scale: Following the Nordics Path

Bank collaborations to create new payment initiatives are not, however, rare. Indeed evidence suggests, particularly in smaller markets, it is essential for creating the required economies of scale.

In the Nordics, this has long been a mantra and it is arguably the reason the region has led the way with some of the most successful and innovative mobile payment solutions globally. Swish in Sweden, MobilePay in Denmark and Vipps in Norway are all products whose success has been partly enabled through collaborative development.

In the case of MobilePay and Vipps, the two mobile payment services initially started out as a single bank-owned solution. For example, MobilePay was originally created by Danske Bank and competed with a rival service called Swipp. Over time, MobilePay began to emerge as the most popular of the two services.

In 2016, Nordea (Denmark's second largest bank) announced it would end support for Swipp (which it partly owned) and switch to MobilePay. Other banks followed suit, and Swipp announced its closure in February 2017. Following Nordea’s decision, Danske Bank began converting MobilePay to a subsidiary, with MobilePay no longer being branded as “by Danske Bank”.

There was a tacit recognition that in small markets, for a solution to generate the required scale and network effects, it needs to have the full market behind it. The ability of the industry to distinguish between areas of collaboration and areas of competition has been an important factor in the growth and success of digital payments in the region.

Collaboration also helped ensure consumer recognition in the service. For example, Swish is available as a dedicated payments app and benefits from independent marketing. Norway’s Vipps claims to have been the fastest growing brand ever in the country’s history, reaching 95 percent brand recognition in just three years after its launch in 2015.

By contrast, the UK Paym mobile P2P service, which was often hidden inside the banking apps of its different participants, failed to get the dedicated marketing support needed to help build customer recognition. As a result, it has largely struggled as a service since its launch in 2014.

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