The firm claims that the MODO network, made up of the 36 existing banking institutions in the country, would be operating as a closed cartel, thus preventing payments through fintechs.
Latin American e-commerce giant Mercado Libre has filed a complaint with the National Commission for the Defense of Competition (CNDC) against Argentina's main shipping companies for prohibited concentration, cartelization and coordinated practices aimed at harming the fintech industry and its users.
The complaint is directed against a virtual wallet called MODO, formed as a corporation by 36 banks, which, according to Mercado Libre, did not request authorization from the CNDC to operate jointly, the firm said in a statement issued on Monday.
"There is a precedent for this type of concentration that is negative for the industry. In 2018, the CNDC investigated Prisma, a company made up of the main banks, for anti-competitive practices. As a result of that investigation, the banks had to sell their stake in that company. This case marked a fundamental milestone in the development of electronic payment methods in the country, as it allowed the emergence of fintechs and the advancement of new digital payment and collection tools," explains Mercado Libre's communication to the media.
In detail, the Mercado Libre complaint indicates that the banks are illegally concentrating on MODO, a digital wallet formed under a partnership between 36 banks that "never notified or requested authorization from the CNDC to operate jointly."
In this way, banks are violating the competition law that requires companies to modify agreements that affect competition.
"By creating MODO, the banks are re-establishing the anti-competitive concentration that had been dismantled in the Prisma case. And once again, it is clear that their main motivation is to coordinate to hinder fintech companies at all costs using the same mechanisms as in the past," the statement said.
In this sense, the fintech led by Marcos Galperin indicates that cartelization is harmful to consumers.
"A cartel is an agreement between competing companies to stop competing with each other. Thus, the 36 banks that are part of the MODO wallet would form a cartel to avoid competing with each other with their own digital wallets. Instead of developing technology and generating better products, they decided to concentrate on MODO, which allows them to agree on their commercial strategies and avoid competition for the businesses that affiliate with their promotions and for the amounts of discounts or refunds they offer to consumers," highlights the Argentine-born e-commerce giant.
ANTIFINTECH PRACTICES
Merado Libre's complaints do not end there.
Over two pages, it is detailed that in non-compliance with the regulations of the Central Bank of the Argentine Republic, banks systematically block and set low and arbitrary limits on transfers,
from CBU bank fees to CVU fintech payment accounts, limiting the freedom of people who choose to manage their money and generate returns through a digital account.
"In addition, banks share users' banking information such as balances and recent account transactions, but they do not share this information with their fintech competitors and prevent other digital wallets from accessing promotions," Mercado Libre continues.
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The Mercado Libre libel indicates that while in other countries such as the United States there are closed systems of instant transfers in which several banks participate, these "are beneficial for users because they allow them to do something that they could not do before. But they only serve so that people can send and receive money immediately, something that in Argentina has been possible for years, by regulation of the BCRA. MODO does not do the same, it is not necessary to have MODO to make transfers in Argentina. MODO has another objective, to coordinate a commercial distribution channel to avoid competition between its participating banks.
The text stresses that six years ago the investigation into the case that ended with the sale of Prisma marked a before and after in the development of payment methods, but that this new case is a setback in terms of competition, because the 36 shareholder banks in MODO have more than 80% of the total value of the banking system's deposits, cards and accounts.
"Faced with fintech innovation and progress in financial inclusion, the banks' response was once again to form cartels , this time through MODO. With the filing of this complaint that affects the entire fintech industry, Mercado Libre seeks to ensure a competitive framework for the development of better financial tools," concludes the company, which has been listed on Nasdaq since 2017.
