Dynamic Competition and Merger Enforcement in the Payments Industry
American Bar Association Antitrust Law Section, 2026
The payments industry has evolved rapidly in recent years, driven by innovations such as digital wallets, open banking, embedded finance, and fintech platforms. These advances have blurred traditional boundaries among banks, technology companies, and payment processors. Concurrently, antitrust scrutiny of mergers in this sector has intensified, particularly for deals involving nascent competitors. This raises the challenge of balancing the risk of anticompetitive consolidation against the potential costs of deterring transactions that may support innovation.
In an article published by the American Bar Association (ABA) Antitrust Law Section, Analysis Group Vice President Hyun Lee examines how US antitrust agencies and courts have applied existing legal and economic frameworks to payments industry mergers. Drawing on the economics of multi-sided platforms, including network effects, skewed pricing structures, and the context-dependent role of data in competition, the author reviews recent merger activity and enforcement decisions. This includes the US Department of Justice’s (DOJ’s) challenge to Visa’s proposed acquisition of Plaid, as well as the non-challenges of the Mastercard/Finicity and Capital One/Discover mergers. Dr. Lee explains that the 2023 Merger Guidelines in many respects formalized analytical approaches that the DOJ and Federal Trade Commission (FTC) had already begun to apply. He also discusses how courts have continued to apply their own evidentiary requirements, including, in cases involving alleged independent entry, the need for concrete evidence that a firm would likely have entered a market on its own, absent the acquisition.
Dr. Lee emphasizes that the costs of enforcement errors run in both directions. Because acquisitions are an especially important exit route for venture-backed startups, overly restrictive enforcement may dampen venture investment, entrepreneurial entry, and innovation. Overly permissive enforcement, on the other hand, may allow incumbents to acquire and extinguish future rivals. The article concludes that a balanced framework should consider market concentration alongside network effects, potential competition, integration efficiencies, innovation incentives, effects on venture funding and entrepreneurial entry, and, ultimately, consumer welfare.