Will Nexi-Sia crush banks in digital payments? Antitrust investigation
What emerges from the provision with which the Antitrust has initiated an investigation to assess the impact of the Nexi-Sia merger on competition in the sectors in which the new group will operate. All the details
The Antitrust has launched an investigation to evaluate the Nexi-Sia merger because the transaction in the electronic payments sector could lead the new entity to assume a dominant position in the digital payments sector.
This is what we read in a note from the Competition and Market Authority chaired by Roberto Rustichelli .
The merger operation – writes the Guarantor – involves various operators, both from the point of view of demand and that of supply, and affects numerous areas of the digital payments sector.
The news of the Antitrust investigation caused the Nexi stock to move back on the stock market.
Also because Equita believes that the probability of approval of the Antitrust investigation for the Nexi- Sia affair may be high but does not completely exclude any remedies.
SIA has signed a contract for the management and processing of credit and prepaid cards issued by Bawag, easybank and PayLife. Bawag is a listed holding company headquartered in Vienna, Austria, serving 2.3 million retail, small business, corporate and public sector clients in Austria, Germany, Switzerland, the Netherlands and other developed markets.
The Group operates under different brands and through multiple channels offering products and complete services for savings, payments, loans, leasing, investments, construction companies, factoring and insurance.
The contract, says Equita Sim, testifies to the company's ability to be a relevant player at an international level and is supportive for SIA's 2022 growth.
The merger operation involves different operators – both from the point of view of demand and that of supply – and affects numerous areas of the digital payments sector, in particular merchant acquiring, processing and issuing payment card services. , retail clearing of payments, transmission of interbank data and also services for the supply and maintenance of ATMs.
FOLLOWING EXCERPT FROM SOME MEASURE ANTITRUST WITH preliminary investigation:
At present, based on the information provided by the Parties and the definition adopted by the Authority in the past, following the transaction, the post-merger entity would have a [45-50%] stake in the supply of merchant acquiring services in Italy, given by the sum of Nexi's stake equal to [45-50%] and SIA's stake [less than 1%]. In the view of the Parties, the share should remain unchanged if the supply of POS is also included in the market. Instead, the post-merger entity would hold [45-50%] in the POS supply alone in Italy, with Nexi holding [35-40%] and SIA holding [5-10%]. In the market, there are also other operators whose shares, however, appear significantly lower than those of the Parties; in fact, the main competitors, namely Unicredit SpA, ICCREA and Banca Sella SpA, according to the estimates of the Parties, respectively hold a stake of [5-10%], [5-10%] and [5-10%].
Considering the above, it is believed that the transaction in question could lead to restrictive effects of competition in the supply of merchant acquiring services, with the establishment or strengthening of a position characterized by significant market power in the post-merger entity.
Furthermore, on the basis of the information available, it emerges that the acquiring services are vertically integrated with the processing services, which constitute the main input of the former, and that these services are sometimes purchased jointly by the final customers, represented by the banking institutions; in this sense, also considering that, as will be mentioned below, following the transaction the post-merger entity appears to acquire a significant market position also in processing services, it is believed that the transaction in question could also determine the effects of vertical and conglomerate nature. These effects, however, will also be investigated in the light of the most recent Community practice and the arguments provided by the Parties regarding the correct definition of the relevant market and the consequent market shares.
Processing services are offered by the processor to merchant acquirers, and therefore to banks, often in conjunction with both merchant acquiring services, in cases where banks do not produce the acquiring service in-house but purchase it from third parties, as well as POS services. . They can also be the Guarantor of Competition and the Market and be provided to banks together with card issuance and personalization services.
At present, on the basis of the information provided by the Parties with respect to the market definition adopted by the Authority, in Italy, Nexi holds a share of [20-25%] in the processing of national debit cards, while SIA holds a share equal to [40-45%], with the consequence that the transaction would lead the post-merger entity to hold a stake of [65-70%] in Italy. Similarly, in the Italian market for the processing of international credit cards, Nexi holds a share of [20-25%], while SIA holds a share of [45-50%] and therefore, following the transaction, the entity postmerger would have a stake of [70-75%]. 24.
On the basis of the foregoing, considering the significant horizontal overlaps, but also the vertical and conglomerate integrations given by the presence of both Parties both in the offer of processing services and in the offer of merchant acquiring services and in the offer of card issuance and personalization, the transaction could raise critical issues from a competitive point of view in the Italian markets for the processing of national debit cards and the processing of international payment cards; these criticalities, however, will be assessed during the investigation also considering the most recent Community practice and the arguments proposed by the Parties regarding the definition of the relevant market.
That said, on the basis of the information provided by the Parties, it appears that, in the Italian market for credit card issuance services, the distribution of the product, as well as the pricing to end customers, can be defined by third-party companies or banks, to depending on the agreement. 14 C9817 – Central Institute of Italian Popular Banks / Si Holding, of 26 March 2009.
Nexi has a market share of [20-25%], while SIA's share is less than 1%; the Parties, on the other hand, are not active in the Italian market for debit card issuing services. Furthermore, numerous and qualified competitors are active in these markets, such as Intesa Sanpaolo SpA (which has a [10-15%] share), Unicredit SpA and American Express (both with a [5-10%] share). If, on the other hand, the thesis suggested by the Parties regarding the geographic and commodity definition of the market were accepted, the post-merger share would be much lower, equal to [1-5%] in the Italian market for credit card issuance services. payment and less than 1% in the analogous European market.
It follows that whatever is the definition of the market to which one wishes to join, the transaction does not appear suitable to raise competitive criticalities of a horizontal nature in consideration of the market share that the post-merger entity would have in the various configured markets, of the marginal presence of SIA and, therefore, of the increase which in any case would be less than 1%, as well as the simultaneous presence of numerous and qualified competitors. Instead, given the nature of the markets in question, characterized by significant elements of vertical and conglomerate integration, considering, in particular, the vertical integration profiles between the issuing processing and card issuing activities, to the extent that issuing banks and PSPs require issuing processing services to be able to offer card issuing services to cardholders, and given that the Parties are active both in processing activities, with a significant market share, and in card issuing activities, currently no may exclude that the transaction is suitable for determining effects of a vertical or conglomerate nature that are also relevant for the provision of card issuing services, which therefore will in any case be subject to investigation.
Based on the information provided by the Parties, the post-merger entity would have a share in the overall market for the supply of smart payment cards (which includes the supply of smart cards and the personalization service) equal to approximately [5- 10%], if we consider the supranational dimension, and to [35-40%], if we consider the national dimension (data in volume) 18. This latter figure, however, would also include in-house supply, and therefore – in the opinion of the Parties – would be overestimated. The Parties also provided market shares (in volume) for the sole provision of the customization service: where a supranational market size is considered, Nexi holds a [1-5%] share, SIA [1 -5%] and Nets [less than 1%], with a combined share of approximately [5-10%]; where, on the other hand, a national dimension is considered, Nexi holds a share of [25-30%], SIA of [10-15%], with a post-merger share of [35-40%]. In the Italian market there are several other specialized operators, also active at a supranational level, such as Thales, with a share of [15-20%], ST Incard, with a share of [10-15%], and IDEMIA, with a share of of [5-10%].
With regard to market positioning, the Parties have estimated a post-merger share for the provision of ATMs (including software and related services) equal to [5-10%] at EEA level and equal to [40-45%] at national level (with Nexi at [25-30%] and SIA at [10-15%] respectively). With regard to its positioning on the market, in addition to the aforementioned arguments in support of a geographical dimension of the supranational market, the Parties put forward further arguments in support of the absence of competitive criticalities deriving from the transaction, such as: i) the fact that such shares would overestimate their market position as the supply of these services is now awarded through competitive procedures; ii) moreover, on the one hand, SIA's share would essentially derive from the relationship with Unicredit SpA, and, on the other hand, the current positioning of Nexi would be the result of the long-term relationship that ICBPI (Nexi's predecessor) had established with numerous banks and which would be decreasing; iii) finally, there would be several rival suppliers capable of exerting strong competitive pressure.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/nexi-sia-stritolera-le-banche-nei-pagamenti-digitali-istruttoria-antitrust/ on Fri, 03 Sep 2021 06:51:39 +0000.