Financial stability and Big Tech

According with the FSB, the entry of Bigtech into financial services, although it has numerous benefits (greater innovation, diversification and financial inclusion), could bring potential financial stability risks.

FSB mentions “the effects on competition (viability of incumbents’ business models); operational linkages between BigTech firms and financial institutions; risks associated with expansion of BigTech into credit provision; and issues arising from BigTech firms’ scale and potential anti-competitive behavior”.

• The FSB also points out that the ability of BigTech firms to maintain credit supply during a downturn is not clear. “Their data-driven -rather than relationship-based- approach to lending might see a sharper contraction of credit during a downturn than for financial institutions”.
• The FSB highlights that the entry of Big Tech in finance implies “a range of issues arise for policymakers, including with respect to additional financial regulation and/or oversight”.