Competition in Financial Services: Three Country Paths, One Bigger Question

Financial inclusion has a competition problem. Despite dramatic gains in access over the last 15 years, financial markets remain concentrated, with too few providers, limited product variety, high prices, and high switching frictions, limiting the ability of consumers to benefit meaningfully from financial access. This raises the question: whose job is it to promote competition? Until recently, financial sector authorities didn’t consider competition as part of their core mandate. Competition authorities, who usually have the mandate, often grapple with the complexity of financial markets and typically intervene only after competition issues emerge.  

Financial sector authorities can and do play a decisive role in advancing competition through the regulatory choices they already make. Brazil, India, and the United Kingdom show how. Each faced different starting conditions, adopted different regulatory tools, and sequenced reforms in distinct ways. Together, their stories show how financial systems can better serve consumers when regulators apply a competition lens. 

Three countries, three different approaches to competition

Brazil’s approach to competition has been notably cumulative and regulator‑driven. Since the early 2000s, the Central Bank of Brazil has steadily removed structural advantages favoring incumbents –  dismantling exclusivity arrangements in card acquiring and expanding non‑bank participation in payments markets. Two decades later, these efforts culminated in two key reforms, both requiring mandatory participation from incumbents: Pix, a regulator-operated instant payment system, and open finance, a reciprocal data‑sharing framework. Critically, the Central Bank of Brazil does not have a formal competition mandate. Yet competition was repeatedly embedded into policy design, particularly by expanding access to infrastructure that incumbents had long controlled. 

In India, competition was strengthened by fixing the foundations of the financial system. The government invested heavily in Digital Public Infrastructure, including a universal digital identity (Aadhaar) that lowered onboarding costs; mass rollout of basic accounts (Jan Dhan Yojana) that expanded coverage; and UPI, a shared, interoperable payments rail. Together, these changes shifted competition away from control of proprietary networks and toward user experience and innovation. Account Aggregator, a consent‑based data‑sharing framework introduced recently, has begun democratizing access to consumer data and shifting power dynamics from providers to consumers. By keeping financial rails open and shared, regulators shifted competition from the infrastructure layer to the application and service layer, supporting rapid and massive gains in digital adoption and fostering an innovative fintech ecosystem. 

Finally, the United Kingdom pursued a mandate-based model, where competition was elevated as an explicit regulatory objective after the global financial crisis. Unlike Brazil and India, the UK embedded competition objectives across its regulatory architecture, giving financial authorities clear enforcement powers, incentives, and accountability to address entry barriers, weak switching, and infrastructure access. Parallel reforms were pursued across payments, data, prudential, and conduct regulation, and in coordination with peer authorities.  

One shared insight: Competition was shaped, not left to the markets

Despite their differences, Brazil, India, and the UK converge on a critical point –  competition outcomes were shaped by regulatory choices, not market forces alone. In each case, financial authorities influenced who could enter, who could access payments and ID systems, who controlled data, and how easily consumers could switch—sometimes by design, sometimes as a consequence of other reforms. Notably, only the UK had an explicit competition mandate, yet all three countries fundamentally changed competitive dynamics in their financial systems. Why, then, does competition so often remain a secondary concern for financial authorities? 

Brazil, India, and the UK converge on a critical point –  competition outcomes were shaped by regulatory choices, not market forces alone.

The dilemma facing financial authorities

There is growing recognition among financial authorities worldwide that competition matters for inclusion, and benefits consumers through lower prices, more tailored products, improved quality, and greater innovation. Yet acting on this recognition remains rare.

One reason is the perception of conflicting priorities. Where competition is not an explicit mandate of the financial authority, it competes for attention with core objectives like financial stability or consumer protection. Moreover, where multiple regulators oversee different parts of the financial system, competition concerns often fall into institutional gaps, becoming fragmented. Each authority sees only a slice of the market, and the full picture belongs to no one.

The second reason is knowledge. Even when authorities want to act, they face practical questions that have no obvious answers. How do they manage trade-offs with primary objectives? When is the right moment to intervene without stifling innovation or market development? Which tools meaningfully shift competition dynamics? How should they divide responsibilities with other regulators, and who should lead when issues are cross-sectoral?

These challenges are compounded by the speed of digital finance. Network effects emerge quickly, consumer habits harden early, and data advantages accumulate over time. Windows of opportunity to shape market structure and dynamics shift faster than many regulatory processes are designed to handle. 

From insight to action: What comes next

To explore these questions, CGAP conducted a cross-country analysis, spanning over 20 years of financial sector reforms across eight countries with varying income levels, regulatory architecture, reform trajectories, and outcomes.  

What emerged were recurring decision points around interpretation of legal mandates, design and governance of financial infrastructure, proportionate licensing and supervisory frameworks, timing and sequencing of reforms, and coordination across institutions. These proved decisive for competition and inclusion outcomes, often more so than competition policy or antitrust laws.

These insights are distilled in a forthcoming CGAP Focus Note offering practical policy considerations for financial sector authorities. Advancing competition does not require new powers or tools — simply the willingness to treat it as part of core regulatory decision-making.