This is an excerpt from a story delivered exclusively to Business Insider Intelligence Fintech Briefing subscribers.To receive the full story plus other insights each morning, click here.Facebook’s proposed crypto project, Libra, is being investigated by the bloc’s antitrust regulator amid concerns that it could have negative impacts on competition, reports Reuters.The probe marks the latest pushback for Libra, with central bankers, lawmakers, and regulators across the world having already voiced concerns over the social media giant’s push into financial services.Business Insider Intelligence Margrethe Vestager, the European Competition Commissioner, said that such an investigation is justified despite the fact that Libra has yet to be launched.Vestager’s announcement comes within weeks of Bloomberg first reporting that the watchdog had begun said investigation into the project.The EU’s made considerable efforts to stimulate financial competition in the bloc — and likely views Libra as an affront to this.The bloc is one of the leading regions in the global open banking movement due to its PSD2 regulation.
The rule is aimed at stimulating competition and innovation in retail banking and payments by democratizing access to financial data.The idea is that, by allowing consumers to have easier access to their financial data and more freedom regarding who they can share this data with, it should enable them to shop around for financial products more easily, thereby increasing competition among providers.Libra, in theory at least, goes against this effort to increase financial services competition.Facebook, along with its tech giant peers Apple, Amazon, and Google, is already under investigation in the US for antitrust.
In the case of Facebook, the company has spent the past few decades buying up smaller competitors to dominate social media and reach unrivaled scale.Its purchase of Instagram and WhatsApp, in 2012 and 2014 respectively, allowed the firm to scoop up these players before they could genuinely pose a threat to its business.Its history of acquiring smaller players that posed a threat and mimicking features developed by competitors when they refused to be acquired, like Snapchat, likely concerns the EU’s antitrust watchdog.
Given Facebook’s size as well as the number of major players that are members of the Libra project, including Visa and Mastercard, there appears to be a genuine possibility that Libra could be a widely adopted payments method — Facebook itself has over 2.4 billion monthly active users.
This would clearly run somewhat counter to the efforts of PSD2.And Facebook’s already vast swath of data on its users makes Libra’s threat to competition even more pronounced.Libra opens the potential for Facebook to enter into financial services beyond transactional services: For instance, it’s already talked about the potential of launching products such as consumer loans.Its existing troves of customer data, coupled with newly acquired financial transaction data as a result of Libra, would clearly give the firm a competitive advantage over financial service providers.For instance, this holistic view of consumers’ lives could enable the firm to assess credit risk much better than financial service firms, allowing it to undercut them.
Here’s an industry opinion, as told to Business Insider Intelligence: “We are big believers that technology creates opportunity for people and businesses globally to achieve their massive potential in our interconnected digital world.We also very much believe that regulation and compliance are the foundation of a responsible global financial system that we all must support and are the bedrock of our business.We welcome the innovation, speed, and connectivity that a leading technology company like Facebook can bring to people all over the world, and are hopeful that regulators will continue to create clear guidelines so new technology can go to market in a responsible way, and support the democratization of opportunity and access that Fintech has the potential to deliver globally.” — Scott Galit, CEO, Payoneer Interested in getting the full story? Here are three ways to get access: Sign up for the Fintech Briefing to get it delivered to your inbox 6x a week.
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