Bank for International Settlements reviews retail digital payments competition, finds incumbents still dominant despite fintech and fast payment growth

The Bank for International Settlements published a bulletin on competition in domestic retail digital payments across advanced economies and emerging market and developing economies. It finds that digitalisation, smartphone adoption, new entrants such as fintechs and big techs, and the spread of fast payment systems have widened payment choices and increased market contestability, but incumbent banks and card networks still hold strong positions in key markets. The bulletin says competition pressures differ between user-facing payment services and the underlying retail payment systems. Payment apps and wallets have grown rapidly, and fast payment systems have created alternatives to card rails in some jurisdictions, particularly in emerging markets. Even so, network effects, high fixed costs, gatekeeper control over technologies such as near field communication, limited interoperability, data advantages and strategic partnerships can entrench market power. In card payments, major global networks continue to dominate many markets and have maintained rising revenues and high margins. It describes central banks as supporting competition in three main roles: operator, overseer and catalyst. Public fast payment systems such as Pix, FedNow, SINPE Móvil and TIPS can increase contestability, while regulatory measures can promote interoperability, non-discriminatory access for non-banks and, in some cases, fee controls. The bulletin also highlights trade-offs between competition and fragmentation, broader access and operational or prudential risk, and rapid adoption and private-sector profitability, and points to better data collection and closer coordination with competition authorities as important for policy design.