The Association of Banks of Argentina (ADEBA) accused, without naming it, Market payment for not opening the QR payment method to all suppliers in the country. They point out that it makes use of a “dominant position” and also take advantage of a hole in central bank regulations.
In a technical report they explain that the QR readers provided by Mercado Pago (which It is estimated to have 70% of that segment of means of payment) only accepts QR payments made with your digital wallet. And that this does not happen with other means of payment, such as credit cards and debit cards.
Mercado Pago sources consulted by clarion They said the company would not comment for now.
The ADEBA report calls for the full interoperability and asks the Central Bank to intervene in the matter.
The ADEBA technical report states the following:
– In Argentina, when a consumer uses a debit or credit card in a business, he can pay for the purchase, without worrying about who supplied the business with the “device” (the POS) that reads the card. All cards can be used at all participating establishments. This is what is called full interoperability.
– This open and interoperable scheme fosters competition and improves the payments ecosystem. The situation is totally different when payments are initiated via a QR code instead of being made by card. The consumer can pay by credit or debit card only to the extent that he is a customer of the wallet or institution providing the QR. If you are not a user of that wallet, you can only pay by wire transfer or cash. QRs are not interoperable.
– What this generates is that a company – which has a provider to accept physical cards that allows it to meet its needs – that wants to charge with QRs is forced to hire as many services as there are wallets of its customers, generating more costs per trade (which translates into price) and complexity of the transaction, for both the trade and the client.
– Why is there this restriction on the consumer’s freedom of choice when paying with a QR code? Because some QR providers, taking advantage of their dominant position in that market, “close” their systems to consumers who are not their customers. This is an anti-competitive attitude which – surprisingly and only for the QR segment – tolerates the BCRA regulation.
– This situation is more serious if we take into account that there is a high concentration of companies that provide QR codes to businesses (acquirers). Although there is no official data, it is estimated that the largest QR supplier concentrates 70% of the total. With this market power, and taking advantage of a lack of regulation, it imposes conditions on credit and debit card holders: to operate with a business’s QR code they must first become customers of its wallet.
– This goes against good practices and global trends, which promote the interoperability of means of payment. With regards to the BCRA policy on means of payment, interoperability is the rule, with the rare exception in QR.
– On the other hand, whoever holds a dominant position in the market could impose commercial conditions that are not advantageous for companies, using – at will – figures of payment aggregators or buyers. This allows, among other things, to delay payment terms to businesses.
– Another relevant question is how the leading QR supplier came to have such a market share that today gives them near-monopoly power in the segment.
– At the risk of simplification, two main factors can be identified: on the one hand, the merit of the company, which first of all offered an innovative and quality product for payments to businesses. On the other hand, the numerous tax and regulatory benefits that authorities initially granted to Bigtech and Fintech for QR payments.
– In 2016, there was already an international consensus on the correct regulatory approach for Fintechs and Bigtechs, which could be summarized as: “equal service, equal regulation, no matter who the provider is”. In that period, the BCRA promoted several positive changes for the modernization and greater efficiency of the means of payment: the CVUs for digital wallets were created and made interoperable with the CBUs, the banks were authorized to open accounts remotely (“on boarding digital”), the e-cheq was created among other positive innovations. Howeverit has not had the precaution to maintain conditions of equal competition in the ecosystem of means of payment.
– At that time, the BCRA went in a direction contrary to international recommendations regarding the regulatory approach to payment methods: it promoted and generated regulatory and tax asymmetries between banks and Fintechs by “shifting the field” and mainly favoring Bigtechs. There were two groups of payment service providers, one was regulated (banks) and others were explicitly unregulated and also had tax advantages. The advantages they had, especially the Bigtechs, were substantial.
– BCRA officials have explained this approach as the “tomato theory,” letting startups grow and then regulating them if necessary. However, the BCRA gave Bigtechs the boot treatment. The consequence has been the display and the exercise of quasi-monopoly power that is currently observed in the QR market. This result was expected, it is what the literature predicts regarding regulations that generate asymmetries, such as those promoted by the BCRA.
– While the BCRA regulations -inexplicably- do not require QRs to be fully interoperable with credit and debit cards, they do require them to be interoperable with respect to account balances. This is It is mandatory for any QR provider that can be read by any wallet, pay with money deposited in bank or PSP accounts. However, in practice this rule is not satisfied for a large number of cases.
– Preliminary data from a private audit proves it almost 40% of QRs are not interoperable, i.e. they cannot be read with other wallets or apps other than that of the QR provider. This is a clear violation of the BCRA regulatory framework.
– If the payment technology provider is also an actor in other stages of the same payment chain, it can generate behaviors that limit the access of other actors and competition. It is equivalent to a car factory taking over the management of the highways and allowing only cars of its brand to travel.. The correct way to regulate this type of market is to have all cars travel on the motorway, without tolls differentiated by brand. One way of regulating may be that whoever has the motorway concession cannot sell cars (whoever supplies the POS or whoever supplies the QR cannot have wallets) and the other is that whoever has the motorway concession is bound to equal treatment for its competitors (interoperability).
– That doesn’t mean interoperability doesn’t recognize who convinced thousands of businesses to operate with QR today. Indeed the regulation assigns them (and should) a recognition in the system canon for those who have joined the company (as an interlocutor for the card issuer, for the brands and for each of the relevant players). That means, the one that has more QR, it charges more.
– Interoperability regulation should not aim to favor one or the other service provider, but should aim for consumers to have an easy payment method, to encourage the use of digital payments and also have the as many options as possible, so that none of them can overwhelm you. Behind monopoly power are more expensive tariffs. Once a player has managed to eliminate or minimize the competition, they can charge more than in a competitive market. A consumer with many options may choose the best or the cheapest, or a combination of both.
– Businesses would also benefit from interoperability, as more businesses would offer to operate with their own QR and a single QR displayed in the business would suffice all wallets can buy and all consumers can use any means of payment.
– Given the starting conditions, it is foreseeable that the supply of QR to companies (the so-called acquisition) will continue to be concentrated and capable of limiting competition. However, the BCRA has the key and is in time for the market to be competitive. A simple regulatory change that establishes that QRs must be interoperable with all wallets and banking apps would give competition and transparency to digital payments.
– This would allow consumers to choose which card to pay with in any QR-enabled business, without being forced to be a member of a specific wallet. It would be a major boost to competition and the development of the payments market and progress in the fight against the use of cash.
– It is also possible that the Secretary of Commerce has a role to play in this matter, given that consumer protection and the defense of competition fall within his sphere of action. Both legal assets are affected by the aforementioned anti-competitive practices.
– The interoperability that the BCRA should require in the field of QR codes for cards is the same already required for transfers or payments between accounts (including CBU and CVU). It’s hard to find a genuine and valid reason not to.
Regarding the lack of interoperability of QRs, Javier Bolzico president of ADEBA expressed: “The BCRA should establish full interoperability of QR codes in order to promote competition and encourage the use of digital currency. This has benefited digital payment users and businesses. The “division” of the payment system based on who is the acquirer providing the QR is not compatible with an integrated and efficient payment ecosystem It is necessary to have an open and competitive QR payment system
Source: Clarin
