The payments market has some specific characteristics that create challenges for achieving good competition. Payments, except in the case of cash, are basically a service for transferring information. Like other such services, there are economies of scale. In addition to economies of scale, there are also network effects, which means that the value of a good or service increases when more people use it.

Economies of scale and network effects can make payments more efficient and cheaper per unit for high-volume operators, but they also make it difficult for new players to enter the payments market. It tends to inhibit innovation and lead to a few players dominating the market or even having a monopoly. At EU level, attempts have been made to improve the conditions for competition through regulation. For example, you can read about how The EU’s Second Payment Services Directive enables greater competition. New rules are also planned to further improve conditions. You can read more about this in the box “New rules can contribute to payments market objectives” in Section Are payments in Sweden accessible?.

Access to infrastructure and payment account services is central to competition

In order to offer payment services, operators need to be connected to the payment infrastructure in some way. Either they can participate directly in, for example, RIX or Bankgirot’s service, but the types of operators who can have direct access to this infrastructure are limited by Swedish law, which is based on the EU’s finality directive. Payment service providers who cannot participate directly in the infrastructure need to participate indirectly, i.e. through an agent who is a direct participant. Currently, this could be a bank. The indirect participant is required to have an account with the bank and have access the services required to make payments, known as payment account services.

Under Swedish law, banks must provide access to payment account services to payment service providers who request them on an objective, non-discriminatory and proportionate basis. However, the law does not specify what payment account services should include. The Payments Inquiry noted that it is, for example, unclear whether a bank needs to offer payment service providers ways for their customers to achieve strong customer authentication, for example via BankID. Furthermore, the Swedish Fintech Association, which represents many non-bank payment service providers, reports that it has become increasingly difficult for their members to access payment accounts. Their report shows that 39 per cent of their members had problems opening or maintaining their accounts in 2023.

European legislation regulating access to the payment infrastructure is now being amended to allow payment institutions and e-money institutions to become direct participants. The Riksbank is now reviewing the conditions for opening up RIX to these participants. The Riksbank also considers that a possible e-krona could help strengthen competition on the payments market by being open to different types of payment service providers building payment services based on e-krona. You can read more about the Riksbank’s work in Chapter 3. Furthermore, the Payments Inquiry has proposed that the Government or one of its authorities should be able to issue regulations on what constitutes payment account services. The inquiry also proposed that the Government should ensure that an in-depth analysis of competition in the Swedish payments market is carried out. The Riksbank welcomed the proposals in its consultation response and considers that competition in the payments market should be analysed on an ongoing basis.