Timing

Authorities that regulate competition topics face the challenge of striking a balance between maintaining healthy competition and allowing innovation in DFS. As the frequency with which new products and services are developed and launched increases, the appropriate time window for regulatory action may get shorter. If an early intervention can hinder innovation, acting too late may enable damaging market behavior. Such authorities need constant market surveillance to act timely, mitigate risks and maximize positive effects.

In a steadier, stabilized scenario, with few entrants or launches (more common in non-digital markets), the authority tends to adopt a “wait-and-see” posture. It is a more reflexive regulatory stance, leaving room for the market to properly take off prior to implementing directed interventions.

However, DFS are intimately linked to technological innovation, which might favor a more pro-active, preemptive positioning, to keep up with the accelerated frequency of market changes. Central banks, securities commissions and telco regulators to a large extent act ex-ante, leading market agents to desired outcomes, while competition authorities act ex-post on anticompetitive business practices such as abuse of market power, and ex-ante on merger control.

For fear of nipping market development in the bud, authorities from developing economies may be tempted to leave aside competition concerns from their work plan. Even though nascent markets require special attention to their initial development, competitive topics should not be abandoned, risking unintended consequences in market structure and conduct later on.