How to regulate the Big Tech in the provision of financial services?

Speech by Agustin Carstens from the Bank for International Settlements (BIS) in which he summarizes pros and cons of the increasing presence of Big techs in finance and potential new regulatory responses to deal with the new challenges introduced by Big Tech in relation to financial stability, fair competition and data governance.

Key highlights from the speech are as follows:

• Big Tech presence in financial services is increasingly relevant:  For example, in China, Big Tech “have come to account for 94% of mobile payments in the space of just a few years”.
• Big Tech have brought numerous benefits for individuals and the economy in general: Reducing the cost of financial services and enhancing financial inclusion around the world.
• But they pose new challenges on financial stability, fair competition, and data governance:

-Financial stability:  For central banks and financial regulators Big techs are too big to fail. The financial sector is overly dependent on its services, for instance “just four big techs provide nearly two thirds of global cloud services, which are becoming a critical service for the financial sector”.

-Preserving fair competition. Big techs have several competitive advantages over other firms by virtue of their business models, technology and networks and digital markets are subject to the model “the winner takes all”, which tends to favor oligopolies.

- Data governance. Big techs have an incentive to collect as much personal data on their users as possible, raising questions on data protection or manipulation of consumers' preferences.

• Regulatory responses, balancing overall benefits with potential risks, will require international cooperation “not only among central banks and financial authorities, but also with competition and data authorities”.