Fintech Australia chief Rebecca Schot-Guppy says Australia’s thriving fintech ecosystem risks being pushed out of the digital wallets and mobile payments sector by mega-platforms like Google, Apple, Amazon, and Shopify.
If left unchecked, their immense market power will also lead to increased costs and decreased choice for businesses and consumers, as well as even higher barriers to entry for innovative start-ups.
“A failure to take action immediately will lead to a significant reduction in the growth of domestic start-ups within the payments sub-sector of Australia’s fintech industry,” Schot-Guppy told a parliamentary committee on Tuesday.
The Fintech Australia head said ensuring fair, open, and competitive markets for digital products and services is increasingly a priority for Governments across the globe.
“Just this month the US President announced sweeping reforms to competition policies aimed at curbing the market power of giant global tech companies. The White House’s statement on this matter read “what we've seen over the past few decades is less competition and more concentration that holds our economy back ... rather than competing for consumers they are consuming their competitors”.
Schot-Guppy said the duopoly of smartphone operating systems means that control over app stores can be used to stifle and thwart competition.
“What has been evident in the app market for some time, is now having a profound impact on the FinTech community. As more and more Australians use their phones as a banking and payment platform, the majority of all digital transactions will be funneled through these select few global mega-platforms.
“We are already seeing the stark implications of this concentrated market power. Apple acts as a strict gatekeeper to the digital wallet on iPhones: it prevents other companies from accessing its NFC chip, which is necessary to make digital payments.
“If Apple continues to maintain sole control over its NFC chips via its Apple wallet, and continues to prevent fintech applicants from adding their own proprietary digital wallets to access the phone’s NFC chip, it will ultimately lead to a monopoly within the payments space.
Furthermore, she said, Apple Pay’s wallet application is pre-installed on Apple’s phones and cannot be deleted, in stark contrast to rival payment offerings like PayPal. Apple also controls the terms and price upon which third parties can be part of the Apple Wallet and most crucially, has visibility of the transaction data that goes with every purchase.
As a start, Schot-Guppy wants Apple to provide direct access to payment technology on their devices to developers.
“This is a no-brainer and regulators such as Germany and the EU more broadly are already taking concrete steps in this regard,” she continued.
Second, she told the hearing that ACCC should play a role in ensuring contract terms, pricing and data collection practices of mega-platforms are fair and foster competition. “Fintech start-ups, whether they are digital wallets or payment processors, have little to no bargaining power against these mega-platforms. In practice, they are forced into ‘take it or leave it’ contracts with highly onerous terms and drive-up costs for consumers.”
Using data to launch copycat products
Finally, she said major e-commerce platforms gain insight into all third-party products sold via their channels and then develop copycat products and favour them on their platform over that of the original product they replicated.
“Consumer data collection should be conducted fairly and transparently in a way that does not impact competition.
Further, she called for digital wallet providers to comply with regulatory and self-regulatory bodies when requested to provide data on usage and other statistics.
One of the lessons of recent policy with the Silicon Valley mega-platforms is that timing is critical, she said.
"Policy-makers must consider policies that safeguard innovation and competition before a market imbalance becomes too large and the damage is irreversible.”