Big banks are abusing their power with plans for payments app, competitors say

Attempts by the main banks to set up an instant payments system are being met with high-level opposition.

Questions have been asked about whether the proposed payments system is anti-competitive and whether allowing it will discourage new entrants to this market.

The Electronic Money Association, whose members include fast-growing Stripe and payment giant PayPal, have submitted and objection to the competition commission here.

Other members of the Electronic Money Association include Amex, Facebook Payments, Revolut and Google Payments.

The move by AIB, Bank of Ireland, Permanent TSB and KBC to seek approval for an instant payments app that would work on mobile phones has also being questioned by Fianna Fáil’s Jim O’Callaghan.

Mr O’Callaghan told Finance Minister Paschal Donohoe in the Oireachtas: “Some people believe it is an anti-competitive measure.”

He said allowing the joint app could prevent other financial institutions entering the Irish market.

“Nobody wants to see that happen. We want to see more competition in the Irish banking market.”

Deputy Central Bank Governor Sharon Donnery told a conference this week that the regulator supports the development of an instant payments solution in Ireland “that is linked to pan-European systems”.

The Electronic Money Association told the Competition and Consumer Protection Commission in a submission that “prima facie, the proposed JV [joint venture] appears potentially anti-competitive and warrants further investigation by the Commission”.

Earlier this month the State’s main banks made a second attempt to secure approval for an instant payments app that would compete with the fintechs.

This was before KBC announced it was considering leaving this market. It is understood that KBC’s departure will not derail the project, but it could raise even more competition concerns as the banking market will become even more concentrated here when the Belgian bank does leave. 

Ulster Bank is already closing and is not part of the joint venture.

The legacy banks have formed a joint venture, Synch Payments, a move that has had to be notified to the Competition and Consumer Protection Commission in case it infringes competition law.

The Electronic Money Association has told the Competition Commission that the joint provision of a payment service by these banks may increase their market share and their dominance of the Irish banking market.

The EMA said the Commission will need to assess whether there are impediments to other payment service providers joining Synch.

The Commission will have to determine whether Synch is consistent with the European Commission’s objective to promote competition within the EU and to remove market fragmentation, the EMA said.

Managing director of Synch Payments Inez Cooper said the system would open to all banks and payment providers.

“It is an open eco-system that we are planning. We will relish others coming on board.”

Synch could be launched by the end of the year for person-to-person payments if it wins approval.

Asked why banks would not use the European Union’s Sepa Instant payment system, Ms Cooper said the banks here did not have the infrastructure in place to use that system.