3. FinTech and Competition Regulatory Concerns in the EU Banking Business Framework

Expert Group on Regulatory Obstacles to Financial Innovation (ROFIEG), 30 Recommendations on regulation, innovation and finance, December 2019; COM (2020) 591 final. Here, the single forms of FinTech innovation are broadly explained and analyzed from a regulatory standpoint.

Commission, Consultation Document on “Fintech: a more competitive and innovative European financial sector,” 15 June 2017; its follow-up: COM (2018) 109 final.

The concept of the retail banking business comprises banking services provided to consumers and small and medium enterprises (COM (2007) 33 final). It is worth noting that, since the beginning, there has been no distinction in the European legal framework between retail and wholesale, investment and commercial banks.

See Ilias Kapsis, Competition law and policy for the EU banking sector in a period of increased economic uncertainty, in International Journal of Law and Management, 2012, vol. 54 (4), 284–301.

We should keep in mind the conceptual difference between liberalization and privatization. The liberalization process concerns any regulatory actions aiming to remove any regulatory burdens to the market entry. See: Reiner schmidt, La liberalizzazione dei servizi di interesse economico generale, in Riv. trim. dir. pubbl., 2003 (3), 687. Therefore, in the EU the idea of liberalization is closely connected with the construction of the internal market defined, according to Art 26 (2) of the Treaty on the Functioning of the European Union (TFEU), as “an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured in accordance with the provisions of the Treaties.”

See R. M. Lastra, Multilevel governance in banking regulation, in M. P. Chiti & V. Santoro (eds), The Palgrave handbook of European Banking Union Law, Palgrave-Macmillan, 2019, 3–17.

Namely, Article 107 TFEU.

Article 17, Council Regulation (EC) No 1/2003, of 16 December 2002 [2003] L1/1 (consolidated version).

When the Commission settled the 2001 Visa decision on MIF it provided that ʽthe Visa multilateral interchange fee is a fee per payment transaction that has to be paid according to the Visa rules between the two banks involved in a Visa card payment. Currently, it is paid by the merchant’s bank to the cardholder’s bank̕ (Commission decision of 9 August 2001 published in OJEC L293/2001). There is internal consistency between the 2001 MIF definition and the definition of interchange fee established in the 2015 MIF Regulation meaning ʽa fee paid for each transaction directly or indirectly (i.e. through a third party) between the issuer and the acquirer involved in a card-based payment transaction. The net compensation or other agreed remuneration is considered to be part of the interchange fee̕ (European Parliament and Council, Regulation [EU] No 751/2015 on interchange fees for card-based payment transactions, in OJ [2015] L123/1).

European Parliament and the Council, Directive (EU) No 92/2014, of 23 July 2014 on the comparability of fees related to payment accounts, payment account switching and access to payment accounts with basic features, in OJEU [2014] L257/214.

European Parliament and the Council, Regulation (EU) no 575/2013 of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012, in OJ [2013] L176/1 (Art 4, let. a).

Annex I, European Parliament and the Council, Directive (EU) no 36/2013 of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC, in OJ [2013] L176/238.

See J. H. Dahuisen, Financial liberalisation and re-regulation, in European Business Law Review, 2000, 373–380.

R. M. Lastra, Multilevel governance in banking regulation, 4.

COM (2000) 580 final. It is up to the Member States to establish whether an economic activity is to be considered as a service of general interest, how it should operate and, in the case, it is such a service, whether compensation may be provided, while the Union through the Commission is in charge of performing a check for manifest error. More recently: COM (2011) 900 final.

See A. M. Collins & M. Martínez Navarro, Economic activity, market failure and services of general economic interest: it takes two to tango, in Journal of European Competition Law & Practice, 2021, vol. 12 (5), 380–386; L. Gyselen, Services of general economic interest and competition under European law—a delicate balance, in Journal of European Competition Law & Practice, 2010, vol. 1 (6), 491–499.

COM (2000) 580 final, 14 f.

See Report of European Commision to the Council of Ministers: services of general economic interests in the banking sector, adopted on 17 June 1998. These results were also mentioned in the COM (2000) 580 final, 15.

First Council directive of 12 December 1977 on the coordination of laws, regulations and administrative provisions relating to the taking up and pursuit of the business of credit institutions, OJ [1977] L322/30.

Article 3, lett. (d), First Banking Directive.

Second Council directive of 15 December 1989 on the coordination of laws, regulations and administrative provisions relating to the taking up and pursuit of the business of credit institutions and amending Directive 77/780/EEC, in OJ [1989] L386/1.

See M. Björkland, The scope of the general good notion in the Second EC Banking directive according to recent case law, in European Business Law Review, 1998, 227–243.

See M. Passalacqua, Profili giuridici del governo del rischio, in A. Brozzetti (ed), L’ordinamento bancario europeo alla ricerca di un assetto stabile, Bologna: Il Mulino 2022, 39–67.

This regulatory package is made up of European Parliament and the Council, Directive (EU) No 59/2014 of 15 May 2014 establishing a framework for the recovery and resolution of credit institutions and investment firms and amending Council Directive 82/891/EEC, and Directives 2001/24/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC, 2011/35/EU, 2012/30/EU and 2013/36/EU, and Regulations (EU) No 1093/2010 and (EU) No 648/2012, of the European Parliament and of the Council, in OJ [2014] L173/190 (hereafter, BRRD); European Parliament and the Council, Regulation (EU) No 804/2014, of 15 July 2014 establishing uniform rules and a uniform procedure for the resolution of credit institutions and certain investment firms in the framework of a Single Resolution Mechanism and a Single Resolution Fund and amending Regulation (EU) No 1093/2010, in OJ [2014] L225/1 (hereafter, SRMR).

See M. Maggiolino, EU State aid law in the banking sector: the story of a revelatory change, in Law and Economics Yearly Review, 2019, 64–124.

With regard to the “critical functions,” see: Single Resolution Board (SRB), Public interest assessment: SRB approach, available at: http://​srb.​europa.​eu.

Olina Capolino, The Single Resolution Mechanism: authorities and proceedings, in Mario P. Chiti & V. Santoro (eds), The Palgrave handbook of European Banking Union Law, Palgrave-Macmillan, 2019, 247–269.

Supra nt. 28.

Article 17 PAD.

COM (2011) 4977 final (preamble 7).

The same conclusions were raised by: José luis Gómez-Barroso & Raquel Marbán-Flores, Basic financial services: a new service of general economic interest?, in Journal of European Social Policy 2013, vol. 23 (3), 332–339.

This document is available at: https://​www.​ecb.​europa.​eu/​paym/​digital_​euro/​investigation/​governance/​shared/​files/​ecb.​degov220929.​en.​pdf?​c7289d0032238188​c71a4803112ea552​.

COM (2007) 33 final, 4 ff.

Commission decision of 24 July 2002, OJEC [2002] L318/17 (thereafter, VISA 2002).

VISA 2002, § 79.

European Parliament and the Council, Regulation (EU) n 751 of 2015 on interchange fee on card-based payment transactions, OJEU [2015] L123/1. With regard to the interaction between antitrust enforcement and regulation, see: See V. Falce, Il mercato integrato dei sistemi di pagamento a dettaglio tra cooperazione e concorrenza (Primi appunti ricostruttivi), in Banca e borsa 2008, vol. 61(5), I, 558–584.

Parliament and the Council, Directive (EU) n 64 of 2007 on payment services in the internal market amending Directives 97/7/EC, 2002/65/EC, 2005/60/EC and 2006/48/EC and repealing Directive 97/5/EC, OJEC [2007] L319/1. In Article 28 as well as throughout the PSD1 the concept of payment system means ʽa funds transfer system with formal and standardised arrangements and common rules for the processing, clearing and/or settlement of payment transactionsʼ. The VISA-card network may be subsumed under the definition of payment system.

Parliament and the Council, Directive (EU) n 2366 of 2015 on payment services in the internal market, amending Directives 2002/65/EC, 2009/110/EC and 2013/36/EU and Regulation (EU) No 1093/2010, and repealing Directive 2007/64/EC, OJEU [2015] L337/35.

Judgment of the European Court of Justice of 11 September 2014, Case C-67/13 P (hereafter, 2014 Cartes Bancaires). More specifically: J. Ruiz Calzado & A. Scordamaglia-Tousis, Groupement des Cartes Bancaires v Commission: shedding light on what is not a ‘by object’ restriction of competition, in Journal of European Competition Law & Practice 2015, 1–3.

2014 Cartes Bancaires, § 86.

See D. S. Evans & R. Schmalensee, Markets with two-sided platforms, in 1 Issues in Competition Law and Policy 667 (ABA Section of Antitrust Law 2008), 674 ff.

ʻThe platform can affect the volume of transactions by charging more to one side of the market and reducing the price paid by the other side by an equal amountʼ: J. C. Rochet & J. Tirole, Two-sided markets: a progress report, November 29, 2005. Available at: https://​www.​tse-fr.​eu/​sites/​default/​files/​medias/​doc/​by/​rochet/​rochet_​tirole.​pdf.

The DLT is a data ledger that may be public, private or hybrid. In a public DLT, every node of the network is empowered to read and validate transactions over the ledger by means of a proof-of-work mechanism; in the fully private ledger there is a central-decision maker who releases write-permissions, while read-permissions may be public or restricted; in the middle, there are the hybrid cases. More details in: M. Pilkington.

See M. Bevir, Governance. A very short story, Oxford University Press: Oxford, 2012, 26 ff.

See A. Walch, Deconstructing “decentralization,” in Chris Brummer (ed), Cryptoassets. Legal, regulatory, and monetary perspectives, Oxford University Press: Oxford, 2019, 39–68.

European Parliament and the Council, Regulation (EU) n 858 of 2022 on a pilot regime on market infrastructure based on distributed ledger technology, OJ [2022] L151/1.

Jean-Marc Israël, Violetta Damia, Riccardo Bonci & Gibran Watfe, The analytical credit dataset. A magnifying glass for analysig credit in the euro area, ECB Occasional Paper Series no. 187.

European Central Bank, Regulation (EU) n 867/2016 of 18 May 2016 on the collection of granular credit and credit risk data, OJEU [2016] L144/44; Guidelines of the European Central Bank of 23 November 2017 on the procedures for the collection of granular credit and credit risk data.

COM (2021) 206 final.

Article 22 (1) GDPR provides that ʽThe data subject shall have the right not to be subject to a decision based solely on automated processing, including profiling, which produces legal effects concerning him or her or similarly significantly affects him or herʼ.

Article 22 (2) GDPR laid down that ʽParagraph 1 shall not apply if the decision: (1) is necessary for entering into, or performance of, a contract between the data subject and a data controller; (2) is authorised by Union or Member State law to which the controller is subject and which also lays down suitable measures to safeguard the data subject’s rights and freedoms and legitimate interests; or (3) is based on the data subject’s explicit consentʼ.

Case C- 634/21, OQ v Land Hessen, Joined Party: SCHUFA Holding AG.

COM (2021) 206 final, 26.

This paper is updated to May 2023