Big tech in financial services could harm competition warns BIS

With some financial services firms struggling with digital evolution, the big technology companies see a chance to grab a large share of the market and that could be a good thing according to the ‘central banks’ bank.’

But there will also be new risks as firms including Amazon, Facebook, Google, and Alibaba, become more involved in payments, savings, and credit; and that requires wider regulatory oversight.

The Bank for International Settlements has published a new report over this week which says these companies could bring efficiencies and increase access to financial services.

However, while financial stability and consumer protection are risks, as they are with more traditional parts of the financial services sector, the BIS report also highlights a new risk, which could impact market competition.

Risk to competition
The big tech firms’ access to the mass of consumer data from their existing platforms may drive rapid change in the financial services sector, giving them dominance in the market and ultimately reducing competition.

"The aim should be to respond to big techs' entry into financial services so as to benefit from the gains while limiting the risks," says Hyun Song Shin, Economic Adviser and Head of Research at the BIS. "Public policy needs to build on a more comprehensive approach that draws on financial regulation, competition policy and data privacy regulation."

The report says that as big techs' move into financial services accelerates, expanding beyond regulatory perimeters and geographical borders; policymakers will need institutional mechanisms to help them work and learn together. Coordination among authorities - national and international - is crucial to sharpening and expanding their regulatory tools.