Clifford Chance

In 2023, competition authorities are set to continue to closely scrutinise the financial services sector.

In 2022, the financial services sector made the headlines in the competition law community around the world. When the head of Australia's Competition and Consumer Commission stated that it will be "engaging with the banking sector more than ever before", she could also have been expressing a global sentiment. Each quarter, we publish an overview of developments relating to the application of competition law to the financial services in our Financial Services Antitrust Bulletin. For a sneak peak at some of the trends we'll be watching in 2023, see below:

1. New legislation focussing on digital competition

The EU's Digital Markets Act came into force towards the end of 2022 including rules on in-app payment mechanisms and access to Near-Field Communication technology used for mobile payments. It imposes on digital companies designated as "gatekeepers" a long list of obligations and prohibitions, including some on data and interoperability which could be used by financial services providers. In the UK, new legislation is expected to be passed and in force by the end of 2023 giving new powers to the Competition and Markets Authority's Digital Markets Unit, which will set out the role for the Financial Conduct Authority ("FCA") within the new framework. In the US, new antitrust legislation has also been proposed, but the future of this is less certain.

2. "Big Tech" in financial services

In October 2022, the UK FCA published a Discussion Paper on the potential competition impacts of "Big Tech" firms' entry and expansion in retail financial services, including payments, deposits, consumer credit and insurance. The FCA will publish a Feedback Statement in the first half of 2023 which will may influence competition authorities around the world.

3. Decline in cash usage 

As cash usage has declined, competition authorities have assessed mergers, cooperation agreements and fee arrangements relating to cash and ATMs in the Netherlands, Spain, Italy, Australia and other jurisdictions. In 2023 we'll see the results of the Australian Competition and Consumer Commission's review of the combination of two of the largest providers of cash services in the country.

4. Interchange fees

Competition authorities continue to monitor compliance with various interchange fee regulations. This has led to the US Federal Trade Commission reaching a proposed consent agreement and the UK Payment Services Regulator ("PSR") imposing fines due to alleged non-compliance. As the PSR conducts its market review into cross-border interchange fees, we expect this trend to continue.

5. Crypto under the spotlight

A class action claiming approximately £10 billion was brought against cryptocurrency exchanges Binance, Kraken, Bittylicious and ShapeShift over alleged collusion in delisting a cryptocurrency from their exchanges. As the sector comes under increased regulatory scrutiny following the collapse of FTX, competition authorities and claimants may also turn their attention towards crypto sector.

6. Central Bank Digital Currencies 

As more jurisdictions pursue Central Bank Digital Currencies ("CBDC"), we wait to see how policymakers will ensure competition in the new payments ecosystem. The Swedish Competition Authority has provided input to the Swedish National Bank regarding the proposed Swedish CBDC and the Bank of England has stated that it will be important to engage with the UK competition authorities on this subject.

7. FinTech mergers

FinTech mergers and acquisitions will continue to be closely examined by competition authorities. This follows high profile deals being abandoned in recent years due to concerns raised by competition authorities such as Visa's acquisition of Plaid and the merger of Crowdcube and Seedrs.

8. Major bank mergers

Competition authorities will review high profile bank mergers, including the acquisition of Suncorp Bank by ANZ in Australia and the acquisition of HSBC Canada by the Royal Bank of Canada. Amendments to China's Anti-Monopoly Law in 2022 also signalled heightened scrutiny over mergers in the financial sector going forward.

9. New financial regulations affecting competition

From the Payment Services Regulations in the UK to the Payment Services Directive in the EU, a large range of reforms to financial regulations will be considered that could impact the competitive landscape.

10. Trading activity under the spotlight

In 2023, the activities of financial market traders will continue to be looked at by competition authorities and courts. Last year, European Commissioner Vestager emphasised that "citizens need to be able to trust that financial institutions do not implement practices that restrict competition in bonds trading markets", following issue a statement of objections against two banks. Two other banks stated in SEC filings that they were engaging with the UK CMA in relation to a financial services probe and we expect to see more developments on this in 2023.