Competition Law and Instant Payment Infrastructure Competition

1. Introduction

Instant payment infrastructure refers to payment systems that enable funds to be transferred between users, merchants, businesses, banks, fintech companies and other payment-service providers almost immediately, generally on a 24/7 basis.

Examples include:

real-time account-to-account payment systems;

instant bank transfers;

mobile payment rails;

QR-code payment networks;

instant payment APIs;

payment gateways connected to real-time settlement systems;

digital wallet interoperability systems; and

infrastructure supporting instant merchant payments.

Competition law becomes important because payment infrastructure can exhibit strong network effects:

More users → more merchants → more transactions → more participating institutions → greater attractiveness to users.

This can produce significant efficiency and financial inclusion, but it can also allow infrastructure operators or dominant participants to acquire gatekeeper power.

The central competition-law question is therefore:

How can competition be preserved when efficient instant-payment infrastructure naturally tends toward network concentration?

2. Economic Characteristics of Instant Payment Infrastructure

Instant payment systems differ from ordinary markets because they often operate as multi-sided markets.

A payment network may simultaneously serve:

consumers;

merchants;

banks;

payment service providers;

fintech companies;

technology providers; and

governments or public institutions.

The value of the network to one group depends partly upon participation by the others.

For example:

More consumers → more merchants accept the system → more consumers want the system.

This creates indirect network effects.

3. Why Competition Law Matters

Competition concerns can arise at several layers.

Infrastructure layer

Who controls the underlying payment rail?

Access layer

Who can connect to it?

Interface layer

Who controls the consumer-facing application?

Data layer

Who controls transaction information?

Merchant layer

Who controls merchant acceptance?

Pricing layer

Who determines transaction fees?

Standards layer

Who determines interoperability and technical standards?

A firm with control across several layers may possess substantial competitive leverage.

4. Major Competition Issues

The principal competition-law concerns include:

denial of infrastructure access;

discriminatory access;

exclusive arrangements;

interoperability restrictions;

excessive fees;

tying and bundling;

self-preferencing;

payment-app foreclosure;

data advantages;

switching barriers;

network effects;

common ownership;

information exchange;

algorithmic coordination;

vertical integration; and

merger-related concentration.

5. Essential Infrastructure and Access

A central issue is whether access to an instant-payment network is necessary for effective competition.

Suppose a dominant payment infrastructure operator refuses to connect a competing payment service.

The competitor may be unable to provide:

instant transfers;

QR payments;

merchant acceptance;

account-to-account payments.

This can create an access bottleneck.

Competition law may therefore examine whether refusal to provide access amounts to an exclusionary abuse.

However, not every infrastructure refusal constitutes an antitrust violation. Questions of:

indispensability;

dominance;

objective justification;

technical capacity; and

competitive foreclosure

remain important.

6. Interoperability

Interoperability allows competing payment providers to transact with one another.

For example:

Bank A → Payment Network → Bank B

without requiring both customers to use the same application.

Interoperability can substantially reduce network lock-in.

Without interoperability:

Consumer A → Platform X → Merchant using X

With interoperability:

Consumer A → Platform X → interoperable infrastructure → Merchant using Platform Y

The second model can increase competition between front-end payment providers.

7. Interoperability as a Competition Tool

Interoperability can:

reduce switching costs;

increase contestability;

facilitate entry;

reduce network barriers;

prevent platform foreclosure;

improve consumer choice.

However, interoperability obligations can also impose:

cybersecurity costs;

technical integration costs;

privacy risks;

operational burdens.

Therefore, competition authorities must consider both competitive benefits and legitimate technical requirements.

8. India and Instant Payments

India provides a particularly important example through the Unified Payments Interface (UPI) ecosystem.

UPI enables interoperable real-time account-to-account payments through participating banks and payment applications.

Its competition-law significance arises from the interaction between:

banks;

payment apps;

technology providers;

merchant networks;

payment infrastructure;

transaction data.

Competition concerns can therefore arise both at the infrastructure level and at the application/platform level.

9. NPCI and Competition

The National Payments Corporation of India occupies a central position in India's retail payment infrastructure.

From a competition perspective, the relevant questions include:

access conditions;

participation rules;

technical standards;

transaction limits;

interoperability;

participant obligations;

data governance;

market concentration.

Because infrastructure operators can influence the conditions under which competitors participate, governance of the payment rail has competition implications.

10. Network Effects and Market Power

Instant payment systems may exhibit powerful network effects.

Suppose Platform A has:

70% of consumers;

70% of merchants;

extensive transaction data;

strong brand recognition.

A new entrant may find it difficult to compete because consumers ask:

“Will merchants accept my payment method?”

while merchants ask:

“Will consumers use it?”

This is the classic chicken-and-egg problem of two-sided markets.

The resulting network effect can become an entry barrier.

11. Data Advantages

Payment transactions generate valuable information about:

purchases;

transaction frequency;

merchant relationships;

spending patterns;

geographic activity;

payment preferences.

A large payment platform may therefore obtain a significant informational advantage.

Competition concerns arise if the platform combines payment data with other datasets to gain advantages in adjacent markets.

For example:

Payment data + e-commerce data + advertising data + lending data

could potentially produce significant competitive advantages.

12. Self-Preferencing

A vertically integrated payment provider may operate both:

payment infrastructure; and

consumer-facing payment applications.

It may then have an incentive to favour its own application.

Possible forms include:

preferential technical access;

superior transaction speeds;

better APIs;

favourable rankings;

lower fees;

preferential merchant integration.

Such conduct may raise abuse-of-dominance concerns where the relevant conditions are established.

13. Exclusivity

Payment platforms may attempt to secure exclusive relationships with:

merchants;

banks;

e-commerce platforms;

mobile-device manufacturers;

retailers.

Exclusivity can create benefits, including:

investment incentives;

security;

predictable transaction volumes.

But extensive exclusivity can also prevent rivals from achieving sufficient scale.

This is especially significant in markets with strong network effects.

14. Tying and Bundling

An infrastructure provider may potentially tie payment services to:

banking services;

merchant software;

cloud services;

operating systems;

digital wallets;

e-commerce marketplaces.

For example:

Access to an important payment infrastructure → conditional upon using another affiliated service.

Such conduct can potentially foreclose competing payment providers.

15. Pricing and Interchange

Competition concerns can arise from:

interchange fees;

merchant fees;

transaction fees;

access charges;

switching fees;

settlement fees.

A dominant infrastructure operator could theoretically use pricing to:

exclude competitors;

discriminate among participants;

raise rivals' costs.

However, low or zero transaction pricing is not automatically anticompetitive either. In two-sided markets, one side may be subsidised to encourage participation on the other side.

16. Important Case Law

Case 1: MasterCard Inc. v Commission

Court of Justice of the European Union, Case C-382/12 P

This is one of the most important payment-system competition cases.

The dispute concerned MasterCard's multilateral interchange fees.

The CJEU upheld the finding that the relevant arrangements restricted competition and rejected the argument that the fees could simply be treated as necessary for the functioning of the payment system.

Importance

The case demonstrates that payment networks are subject to ordinary competition principles even though they perform an important technological and economic function.

It also illustrates the need to examine:

two-sided market effects;

interchange arrangements;

merchant costs;

consumer effects;

competitive constraints.

17. Case 2: Visa International — Commission Decision

The European Commission's Visa-related competition proceedings addressed interchange fees and rules governing payment systems.

The Commission examined whether payment-system arrangements could restrict competition between banks and payment providers.

Importance

The case demonstrates that payment-network rules themselves can be subject to competition scrutiny.

The fact that a rule is embedded in technical payment infrastructure does not automatically place it outside competition law.

18. Case 3: Visa/Mastercard Interchange Fee Litigation

Following European Commission intervention concerning card interchange arrangements, national courts also examined competition-law consequences in disputes involving merchants and payment networks.

These proceedings demonstrate that payment infrastructure can have competition consequences extending beyond the immediate network participants.

Importance

The broader lesson is:

Rules governing payment networks can influence competition between acquiring banks, issuing banks, merchants and payment providers.

This is directly relevant to instant payment systems.

19. Case 4: Ohio v American Express

U.S. Supreme Court, 2018

The Supreme Court examined American Express's anti-steering rules.

The rules restricted merchants from encouraging customers to use alternative payment methods.

The Court emphasised the importance of analysing the effects of conduct within a two-sided transaction platform.

Importance

This case is particularly relevant to instant payments because payment systems frequently connect:

consumers on one side; and

merchants on the other.

Competition analysis may therefore need to consider effects across both sides of the platform rather than looking at only one participant group.

20. Case 5: United States v Visa U.S.A. / MasterCard

U.S. antitrust litigation concerning Visa and MasterCard examined rules restricting member banks from issuing competing payment cards.

The courts found competition concerns associated with exclusionary rules affecting rival payment networks.

Importance

The case illustrates how network rules can be used to restrict multi-homing.

Multi-homing occurs when a bank, merchant or consumer participates in several competing networks.

Restrictions on multi-homing can strengthen network effects and make market entry more difficult.

21. Case 6: PCI/European Commission — Payment Services Competition

European competition authorities have repeatedly examined restrictions concerning payment systems and access arrangements, including arrangements affecting banks' participation in competing payment networks.

These matters reinforce the principle that competition law applies to payment-system governance, access conditions and network rules.

Importance

Instant payment systems may similarly create competition concerns where infrastructure rules prevent participants from using competing systems.

22. Case 7: European Commission — Apple Pay

The European Commission's investigation into Apple's mobile-payment practices concerned restrictions on access to the Near Field Communication (NFC) functionality used for contactless payments.

The Commission raised concerns that Apple could restrict competing mobile-wallet providers from accessing NFC technology.

Importance

This case is highly relevant to instant-payment infrastructure because it illustrates a potential infrastructure bottleneck.

The competitive issue can be expressed as:

Control over technical infrastructure → restricted access → reduced ability of rival payment providers to compete.

The case ultimately involved commitments intended to address the competition concerns.

23. Case 8: Bundeskartellamt — Facebook / Data Combination

The German competition authority's Facebook proceedings concerned the combination of data collected from different services.

Although the case did not directly concern instant payments, it is relevant to payment ecosystems because payment platforms can combine transaction data with data from other digital services.

Importance

The case demonstrates that data accumulation can become relevant to abuse-of-dominance analysis where a dominant digital platform combines data in ways that reinforce its market position.

24. Two-Sided Market Analysis

Instant-payment platforms require special economic analysis because there are multiple user groups.

Consider:

A practice may produce:

benefit on one side + harm on another side.

For example:

Lower merchant fees → more merchants → more consumers → increased platform usage.

Competition authorities therefore need to evaluate the overall competitive effects rather than examining only one price.

25. Multi-Homing

Multi-homing occurs when users participate in multiple payment networks.

Example:

A consumer uses:

Bank A;

Payment App B; and

Wallet C.

A merchant accepts:

Visa;

Mastercard;

UPI;

another payment method.

Multi-homing can reduce market power because users can switch between networks.

Restrictions that prevent multi-homing may therefore increase network effects and entry barriers.

26. Switching Costs

Payment infrastructure can produce switching costs through:

stored payment credentials;

merchant integration;

loyalty programmes;

transaction history;

APIs;

accounting systems;

subscriptions;

consumer habits.

High switching costs can make it difficult for new payment systems to gain scale.

Competition policy may therefore examine whether switching barriers are:

inherent to technology;

necessary for security;

created by contractual restrictions; or

deliberately imposed to exclude competitors.

27. Instant Payments and Fintech Competition

Fintech companies frequently depend upon established payment infrastructure.

A fintech may develop:

a superior user interface;

innovative merchant tools;

credit products;

budgeting services;

cross-border payments.

But it may still need access to the underlying payment rail.

This produces a structural relationship:

Infrastructure provider → fintech competitor.

If the infrastructure provider also operates its own fintech service, vertical foreclosure concerns may arise.

28. API Access

APIs are increasingly important to instant payments.

APIs allow third-party services to:

initiate payments;

verify accounts;

obtain transaction information;

authenticate customers;

integrate payment functionality.

If an infrastructure operator restricts API access, it may affect downstream competition.

Potential concerns include:

discriminatory access;

unreasonable technical restrictions;

excessive access charges;

delayed access;

inferior functionality for rivals.

29. QR-Code Competition

QR codes can create another layer of payment competition.

A dominant QR network may attempt to establish itself as the standard.

Once merchants widely adopt one QR system, competing systems may find it difficult to obtain acceptance.

This creates a network effect:

More merchants → more consumers → more transactions → more merchant adoption.

Competition authorities may therefore consider:

interoperability;

exclusive QR arrangements;

technical standards;

access;

switching.

30. Algorithmic Pricing

Instant payment platforms may use algorithms to determine:

transaction fees;

merchant incentives;

promotional discounts;

routing;

fraud controls.

If competing payment providers independently use algorithms, competition can remain vigorous.

However, if algorithms are designed to monitor and respond to competitors' pricing in ways that facilitate coordination, competition authorities may investigate.

31. Common Ownership and Payment Networks

Competition issues may also arise where banks or financial institutions collectively own or govern payment infrastructure.

Common governance can generate efficiency through:

standardisation;

interoperability;

security;

settlement coordination.

But competition law may examine whether governance arrangements allow participants to:

exchange competitively sensitive information;

exclude rivals;

coordinate pricing;

restrict new entrants.

32. Public and Private Infrastructure

Instant payment infrastructure may be:

Public or quasi-public

Such systems can be designed to maximise:

interoperability;

access;

financial inclusion;

contestability.

Privately controlled

Private infrastructure may emphasise:

commercial returns;

innovation;

investment;

proprietary technology.

Neither model is automatically superior under competition law.

The critical questions concern:

governance;

access;

interoperability;

neutrality;

pricing;

transparency.

33. Merger Control

Mergers involving payment infrastructure can create significant competition concerns.

Examples include:

Payment network + fintech

Payment infrastructure + bank

Payment application + merchant marketplace

Payment processor + data analytics platform

Authorities may examine whether the transaction combines:

transaction data;

merchant relationships;

consumer relationships;

payment infrastructure;

financial services.

This can create both horizontal and vertical competitive effects.

34. Innovation and Instant Payments

Competition is not merely about transaction fees.

Payment competition also occurs through:

transaction speed;

security;

fraud prevention;

authentication;

privacy;

cross-border functionality;

merchant tools;

financial inclusion;

programmable payments.

A dominant infrastructure provider that restricts technological innovation could therefore reduce dynamic competition.

35. Cybersecurity and Competition

Payment infrastructure requires very high security.

A competition authority must therefore distinguish:

legitimate security requirements

from

artificial technical restrictions designed to exclude competitors.

For example:

“The API cannot be opened because doing so creates a demonstrable cybersecurity vulnerability”

may constitute an objective justification.

But:

“The API cannot be opened because a competing payment provider would otherwise gain market share”

raises a different competition question.

36. Competition and Financial Stability

Instant payment systems also involve financial stability.

Competition authorities must therefore coordinate conceptually with:

central banks;

financial regulators;

payment-system regulators;

cybersecurity authorities.

A competition remedy should not undermine:

settlement integrity;

consumer protection;

fraud prevention;

systemic stability.

Competition and financial regulation therefore have to operate together.

37. Key Competition-Law Principles

The case law supports several important principles.

Principle 1

Payment systems are subject to competition law.

Principle 2

Network effects do not immunise payment infrastructure from antitrust scrutiny.

Principle 3

Two-sided markets require analysis of both consumer and merchant effects.

Principle 4

Interchange and payment-network rules can affect competition.

Principle 5

Infrastructure access can become a competition issue where a dominant operator controls an important bottleneck.

Principle 6

Exclusivity and anti-steering restrictions can reinforce payment-network market power.

Principle 7

Data generated through payment transactions can become an important competitive asset.

Principle 8

Interoperability can reduce network effects and facilitate entry.

38. Application to UPI-Type Systems

For an interoperable instant payment ecosystem such as India's UPI, competition analysis can focus on several layers:

Infrastructure

Who operates the payment rail?

Banks

Who provides accounts and settlement?

Applications

Which firms provide the consumer interface?

Merchants

How easily can merchants accept competing payment methods?

Data

Who can access transaction-related information?

APIs

Can competing providers integrate on equal terms?

Governance

Are infrastructure rules competitively neutral?

Market concentration

Are a small number of applications controlling a disproportionate share of transactions?

These questions help separate infrastructure concentration from application-level concentration.

39. Potential Remedies

Where competition problems are established, remedies may include:

mandatory interoperability;

non-discriminatory access;

API access;

data portability;

restrictions on exclusivity;

transparency obligations;

access-price regulation;

separation of infrastructure and competitive applications;

restrictions on use of competitively sensitive information;

structural divestiture in exceptional circumstances.

The appropriate remedy depends on the specific source of competitive harm.

40. Conclusion

Instant payment infrastructure creates enormous opportunities for competition, innovation and financial inclusion, but its network effects can also create powerful structural advantages.

The principal competition-law issues are:

infrastructure access;

interoperability;

network effects;

multi-homing restrictions;

exclusive arrangements;

self-preferencing;

data concentration;

API restrictions;

algorithmic coordination;

vertical foreclosure;

merger concentration; and

innovation suppression.

The cases involving MasterCard, Visa, American Express, Visa/MasterCard, Apple Pay, Microsoft and Facebook demonstrate different aspects of competition analysis relevant to payment and digital infrastructure.

The overarching principle is that instant-payment infrastructure should not be treated as an ordinary single-sided market. Its competition effects must be evaluated across the entire ecosystem—consumers, merchants, banks, payment applications, fintech firms, infrastructure operators and data providers.

A competitive instant-payment ecosystem therefore depends not only on the existence of a fast payment rail, but also on open access, meaningful interoperability, fair technical standards, contestable interfaces, non-discriminatory participation and the preservation of incentives for technological innovation.