Part 2: The ACCESS Act And What It Could Mean for POS Data Tariffs

This is Part 2 of a 2-Part series on POS integration fees. Part 1 can be found here.

Europe noticed that its banks were too closed with data access, effectively erecting walled gardens that made it difficult for innovators to compete. This in turn stymied progress and consumer value. In Europe, even if consumers wanted to share their banking information with a mobile wallet app, let’s say, the bank would throw up a bottleneck on the data sharing, making it impossible for the mobile wallet app to collect the requisite information to deliver the service to the customer.

In 2018 Europe correspondingly enacted the PSD2, or Payment Services Directive. The law requires that banks build application programming interfaces (APIs) to give third parties access to banking customer data (assuming customer consent, of course). This levels the playing field and enables technology and product companies (i.e. innovators) from Google to fintech startups to compete with the, in our opinion, shit products put out by banks.

It’s our guess that banks couldn’t or wouldn’t respond to third party data requests on their own accord because:

1. Good engineers don’t go to work at banks (they work at tech companies/startups where tech is prioritized and appreciated) so banks couldn’t get integrations executed in a reasonable time;
2. The banks figured that one day, in 47,000 years when they could hire good engineers, competent product managers, and remove their bureaucratic bloat, they might build something useful with said data and thusly wouldn’t want any potential competitors to have it today.

If this sounds familiar it’s because you’ve seen it with walled gardens from POS companies forever: POS companies prevent higher value and better experiences for their own customers under the assumption that at some point in the nondescript future the POS company might possibly, maybe, tentatively do something. They have no idea what that something is, of course, but why do anything today – like allowing third party data access – if it means that the something might not exclusively benefit themselves. (By the way, at its current rate we think NCR becomes an HBS case study under this exact same thesis).

Across the pond, three American Senators have put forward legislation that would closely mimic the goals of PSD2. The difference being that the legislation is aimed at the large tech monopolies, not the banks.

Called ACCESS, the legislation would allow users to move their data in and out of any of the major tech giants without any unreasonable tolls or fees. Here’s a summary on Twitter from one of the bill’s authors, and we rather enjoy his analogy of emails:

E-mail is an interoperable service built on open standards. Can you imagine if you were only able to email people with the same email provider? Or if you had to pay a $10/month to email outside your provider? Back in 2001, the FCC recognized that interoperability was key to competition and required then-dominant AOL to make its instant messaging service compatible with its competitors.

Mark Warner, US Senator (Virginia)

We’ve embedded the full text of ACCESS below if you want to read it – it’s only 17 pages long.

It’s not hard to see how ACCESS is intended to make it easier to move data in and out of any technology platform without substantial fees or headaches. This is why we believe the scope of ACCESS will come to encompass POS companies and their little fiefdoms of data silos. The eye test on “reasonable” interoperability fees as mentioned in Sec 4.(c)(2)(B)(iii) will definitely not be the 30% tariffs that the likes of Square, Clover, Toast, and NCR levy today for integration to their platforms (note that these are the latest data points we have and they may change in the future).

For the record, we’re not in favor of heavy-handed government interference and we think that private markets disrupt themselves eventually – even the Googles of the world are not immune to competition (Facebook certainly became a fly in their ointment). But one must wonder how long that disruption takes, and the ramifications on societal progress absent some exogenous influence to catalyze the first ripples of disturbance.

In the mean time, merchants, third parties suppliers, and even consumers suffer under the oppressive financial burdens these POS companies create. When someone can truly quantify consumer harm there will be a rush of legislators seeking to peel back the onion on POS and payments – ACCESS Act or not.