Some bank CEOs want to emulate Facebook and Amazon in building platform banking. But the tech giants have their own challenges, writes Brain Caplen.

Banks may have late-mover advantage when it comes to their digital strategy. But they still need to make sure their infrastructure is well designed to avoid falling foul of the competition and data protection authorities.

This is what is currently happening to the tech giants, with the most notable example being Google’s €2.42bn fine in 2017 by the European Commission. The commission complained that Google had abused its dominance in internet search by giving an advantage to its own comparison shopping service.

The commission also fined Facebook €110m for failing to provide the correct information on the potential for the automated user matching of accounts across platforms when it purchased WhatsApp. Facebook has also been fined by €150,000 under French data protection rules. Meanwhile, Amazon and Apple have been under fire by the commission over tax arrangements in Luxembourg and Ireland.

In 2018, the heat on the tech sector is likely to be turned up further, with Asia already looking to follow Europe’s lead. Major areas of concern are access to platforms, exclusivity agreements made between platforms and sellers, pricing in general, the method by which services are ranked on comparison sites and any online psychological pressure used to generate sales.

For banks considering a strategy of having a global platform and a financial ecosystem of different providers, it is essential to take account of these key areas of contention before going ahead.

For a flavour of how the European Commission is approaching the issue, here is what renowned competition commissioner Margrethe Vestager has said: “…as competition enforcers, we need to keep an eye out for cartels that use software to work more effectively. If those tools allow companies to enforce their cartels more strictly, we may need to reflect that in the fines that we impose. And businesses also need to know that when they decide to use an automated system, they will be held responsible for what it does. So they had better know how that system works.”

What’s the solution? Antitrust, competition and trade partner for law firm Freshfields Bruckhaus Deringer, Deirdre Trapp, says: ”The questions that banks going down the platform route should be asking are: who has access and who is being denied access? If you grant access what conditions are attached? Is it exclusive and does it unfairly exclude other suppliers?” These and other competition issues are covered further in a new report from the firm called Global Antitrust in 2018.

Brian Caplen is the editor of The Banker. Follow him on Twitter @BrianCaplen

Register to receive my blog and in-depth coverage from the banking industry through the weekly e-newsletter.

Order The Banker July edition

Join our community

Request a demonstration to The Banker Database

Tech Talk: interview with Pullen Daniel, nCino

Pullen Daniel, managing director - Europe, at nCino, talks to Joy Macknight about how cloud computing is driving digital transformation in the banking industry and how banks can put the customer at the centre of innovation.

Watch more videos

The Banker on Twitter

By continuing to use this site you consent to the use of cookies on your device as described in our cookie policy unless you have disabled them. You can change your cookie settings at any time but parts of our site will not function correctly without them.