The UK government must not follow the US in clamping down on Visa and Mastercard, as it would open the door for big tech and companies leveraging emerging technology to destabilise the UK’s payments ecosystem, global fintech leader Rafal Andzejevski said.
The intervention from the PayAlly CEO responds to new regulations recently proposed by the US Federal Reserve, which would cap Visa and Mastercard’s processing fees.
Andzejevski, whose fintech provided international payment services in 39 currencies last year, believes the UK must avoid following suit.
Rafal Andzejevski said: “Although capping Visa and Mastercard fees would reduce the financial burden merchants typically pass on to consumers, new regulations would unsettle an otherwise healthy payments ecosystem, which would be more damaging in the long-term.”
Both firms have facilitated UK transactions for several decades and are accepted by nearly every retailer, setting the benchmark for a secure and efficient payments landscape. But Andzejevski warns undermining their position would only fragment the broader ecosystem and enable big tech firms to consolidate a lot of sensitive data. Andzejevski believes this could open the door for them to penetrate the market like WeChat and Alipay have done in China.
In China, WeChat and Alipay account for 91% of all digital payments, while in the UK, Apple boasts the highest Point-of-Sale penetration globally at 70% in-store and 37% online. But, Andzejevski emphasises a payments landscape dominated by big tech would spell the end of fair competition, and that the UK must ensure Apple’s growth does not continue unchecked.
Andzejevski continued: “The lack of major card scheme providers like Visa and Mastercard left an open goal for WeChat and Alipay to dominate payments in China. This was despite the introduction of UnionPay in the country, which was the Government’s attempt to unify China’s credit card and payment networks. If the UK government isn’t mandated to protect Visa and Mastercard, it could create a window for big tech firms to solidify their market presence and become leading players.
“Apple Cash already exists as a digital payments card in the US, operating under the Discover network, and it won’t be long until Apple sets up its own payments network here. The decades-long partnerships Visa and Mastercard have established with retailers and banks in the UK have created a robust payments system that works for consumers and businesses.”
AliPay and WeChat have come under scrutiny in recent years for anti-competitive practices and Andzejevski warns the UK and other Western markets face a similar situation where the security of sensitive user data could be in jeopardy.
Andzejevski explains: “If Apple continues to gain access to sensitive financial data with an extended reach over the payments landscape, it could use it to its advantage to gain an uncompetitive advantage within the tech sector too.”
Andzejevski also warned against payments players leveraging emerging technology, which could pose security risks for users.
He added: “Emerging technology such as AI and ML is still in the early stages of development and unleashing this technology on the payments ecosystem unchecked would pave the way for fraudulent activity such as data breaches and scams.”
The UK’s Competition and Markets Authority (CMA) established a specialised Digital Markets Unit in 2021 to scrutinise fast-changing sectors such as social media, but Andzejevski calls for big tech’s growing control over financial services to become a central focus of their remit.
He concludes: “The UK government and its regulators must find the right balance that promotes healthy competition and safeguards the health of our financial ecosystem. Instead of following in the US’s footsteps in intervening in the payment ecosystem, we must promote and support payment start-ups so they can grow and prosper.
“Visa and Mastercard act as the last line of defence against a payments ecosystem that would closely resemble China’s. Putting the brakes on payments regulation, for now, is the best way to keep big tech and emerging technology in check.”