The Hellenic Competition Commission (HCC) published on 27 December 2022, the Final Report of the sector inquiry in financial technologies (FinTech), the Greek text of which can be found here. The executive summary of the Final Report is also available in English here. Read more about the sector inquiry into Fintech here.

Τhe term “FinTech” is used to describe the application of technological innovation to financial services from which new business models, applications, processes, or products can emerge and which could have a material impact on the way financial services are provided. The sector of these financial technologies, namely the provision of financial services through innovative information technologies (artificial intelligence) and communications, is a new and constantly growing market, which provides significant benefits to consumers and businesses, as it contributes to the development of innovative products, which have significant advantages over traditional financial services, such as speed, convenience, transparency, lower cost and wide availability.  As a matter of fact, the provision of a full portfolio of services and more personalized financial services is favored, while the participation of start-up businesses in the financial market is enhanced.

Against this backdrop, the HCC undertook to carry out an in-depth investigation into the competitive conditions in the financial technologies sector, in order to enhance consumer welfare and to contribute to the country’s digital transformation and the promotion of innovation. 

The sector inquiry was designed with the aim of maximizing the involvement of all stakeholders (consumers and businesses). In this context, the HCC used a variety of methods to collect the necessary data, in particular by organizing open teleconsultation and sending extended questionnaires to all involved. In May 2020, the HCC invited any interested party to submit written comments on the prevailing competitive conditions and the existing problems in financial technologies, as well as to express interest in participating in a teleconsultation with HCC executives.

Furthermore, a market investigation took place, in the context of which the HCC addressed an online questionnaire via its relevant web-based platform to 153 companies active in the Fintech sector in Greece. The questionnaire was addressed to all traditional providers of Fintech services (e.g. banks), and a significant number of startups and tech-companies. Responses were received from 63 companies, 34.92% (22 companies) of which are traditional financial service providers, 25.4% (16 companies) are FinTech start-ups, 14.29% (9 enterprises) are technology firms, while the remaining 25.4% (16 enterprises) are other service providers, including 4 payment institutions, 3 of which domestic and one branch of a licensed foreign payment institution. The respondents to the survey of the Directorate-General for Competition (GDC) of the HCC have as their main activity the provision of payment services (mentioned as the main activity in 41.27% of the answers), while the provision of banking services (banking) was mentioned as a main area of activity in 30.16% of the answers

Upon publication of the Interim Report for the sector inquiry on 22 December 2021, a public consultation was launched, in the in the context of which interested parties were given the opportunity to express their views on the published document.

The HCC’s inquiry shows that the current market situation is still immature and evolving. Therefore, despite the extensive regulation of the relevant markets, which may occasionally create barriers to entry, any proposals in the framework of the sector inquiry, for its modification or restriction are made without prejudice to the special role that regulation plays in these markets, in view of their particular characteristics and of the paramount importance of legal certainty. In any case, the experience and know-how of the sector regulator and the competent supranational organizations must be taken into account.

A broader issue, referring to all markets under investigation, which is at the crossroads of the application of competition law and sector regulatory policy, is related to the possible strengthening of the market power of already established service providers in both the banking and insurance sectors as well as the power of Big Tech companies, through the use of extensive, non-public, multi-level (including personal) data (big data), which they acquire and possess from their activities in different markets, possibly through self-preferencing or enveloping practices. In addition, this phenomenon does not preclude possible exclusionary effects, for those competitors who cannot - at least at the same cost - collect and / or process such critical information. It is thus possible to displace small and / or start-ups (e.g. through denial of data access) or even exploiting them (e.g. data access overcharging practices) in their efforts to access user data. These phenomena may on a case-by-case basis be partially covered by sector legislation (see the access arrangements adopted under the Payments Directive also known as “PSD 2”), but the Hellenic Competition Commission must be ready to take action against practices that are not fully addressed through regulatory measures, especially if they occur in the framework of an ecosystem and not just of one relevant market. In this regard, the absence of similar regulations in other markets (e.g. Insur Tech), as well as the phenomena of “platforming” and ecosystem development, based on the answers of participants in the survey of the HCC, raises again the question of the application of competition law in order to fully and holistically address the issues that arise. One may consider the set-up of an open banking monitoring authority, in cooperation with the Bank of Greece, in case anti-competitive practices are observed that fall beyond the regulatory framework and lead to competition distortions.

In particular with regard to payment services, it should be emphasized that national legislation has not made full use of the discretionary powers provided by the PSD 2 Directive to adopt measures aligned with the principle of proportionality in order to allow a more case-by-case approach of the licensing requirements. This may result in increased entry barriers for Fin Tech startups, which will face high costs in obtaining licensing since they cannot be exempted from horizontal obligations that pertain for all participants in the relevant markets, given that there is no room for flexibility to preserve real equality of opportunities between established payment service providers and those based on new technologies.

The same stands for national electronic money legislation. There is no fertile ground for a case-by-case approach (possibly through the Sandbox tool), which will facilitate the entry of new players into the market, through reduced obligations, in the light of the principle of proportionality. These deficiencies could be remedied by amending the legal framework, so that any restrictions imposed are necessary and directly related to the operational and financial risks faced by Fin Techs.

It is also advisable to support, strengthen and accelerate the initiatives announced by the European Commission regarding the retail payment strategy for the EU. 

In case that inadequacy of regulatory measures is observed at European level, it would be advisable to look for alternatives to adapt national legislation. In particular, the adoption of initiatives and possibly legislation in the direction of:

• solving issues arising from the existence of many different application programming interface (API) standards and different levels of API functionalities, which may interfere with the provision of payment startup services and account information, in order to ensure adequate, efficient, secure and on equal terms access to payment account data. The Hellenic Competition Commission, within its competences, is capable to contribute to the efforts of the sector regulator, the Bank of Greece, in removing the relevant barriers. Within this context, it is of vital importance to invest on the rapid and full adoption and monitoring of the implementation of the relevant EBA Guidelines on technical standards as well as on the formulation of pricing policies by the Account Service Payment Providers, on the basis of reasonable, transparent and uniform criteria to avoid discrimination and exploitative pricing practices,
• extending the scope of the Settlement Finality Directive, in order to include electronic money institutions and payment institutions, subject to appropriate supervision and mitigation of risks,
• establishing a common standard for QR codes presented by both traders and consumers,
• ensuring the right of access, under fair, reasonable and non-discriminatory conditions, to the technical infrastructure deemed necessary to support the provision of payment services,
• creating a Network for the Promotion of Open Banking and Payments in Greece, with the participation of Authorities which could contribute to the consolidation of an Open Banking framework. This Network could have the power, inter alia, to adopt codes of conduct for firms active in the industry, as well as to serve as a forum for the exchange of information with a view to facilitating each participating Authority in performing its functions.

In addition, it is important to encourage consumers to use technological means to make their payments. This can be enhanced both through the adoption of clear and less fragmented consumer protection legislation and effective institutional consumer protection. 

From a general overview of the regulatory framework for trust services, the fight against money laundering, terrorist financing and Know Your Customer, it is apparent that compliance with the law is still a costly and demanding task, which causes regulatory and compliance costs for providers, especially in relation to incumbent banking providers active through traditional channels. In view of this, in future legislation, it would be appropriate to explore the possibility of introducing more specific settings adapted to the new digital environment that could proportionately mitigate FinTech compliance costs and yet provide greater clarity and legal certainty with more precise requirements, depending on the customer’s risk level. In this respect, in cases where the current legal framework leaves room for a partially adapted approach under the principle of proportionality, this should be upheld by the supervisory authorities. Needless to say that the experience of the Regulatory Sandbox of the Bank of Greece will be valuable in this regard.

Finally, it is submitted that, with regard to issues relating to API standardization, as well as the extension of the applicable regulatory framework in order to cover the access to data for the purposes of providing a series of financial services (further to payment services, which are covered by PSD2) in the context of promoting an Open Finance system, the European Commission is expected to take action soon, addressing these issues at a supranational level.