The potential sources of competitive concerns in the online payment sector

This study analyses the intensity of competition in the online payment sector in the EEA, with a focus on 14 countries. For the purpose of the study, online payments refer to electronic payments made by consumers to merchants for goods and services purchased online. A novel database allows to identify the most commonly used payment methods and the main operators offering them in the period 2018-2022. A consumer survey and a consultation of various industry stakeholders complement the data, providing evidence on the drivers of consumers’ and merchants’ choice of payment method, as well as on the competitive relationship among providers of payment methods. Finally, a behavioural experiment provides original evidence on the causal effect of display practices on consumer choice of payment method. Based on these inputs, the study examines the competitive dynamics in the sector and the main recent market developments, and finds that while innovative payment methods have emerged, traditional methods such as cards maintain a strong presence in many of the selected countries. Considering certain structural features of the sector which may be conducive to entrenchment of market power, the study focuses on the competitive role and incentives of international card schemes, banks, Big Tech companies and Paypal.