Amazon, Alibaba’s payment affiliate Alipay and other internet and Big Data players are a threat to traditional banks, warned Agustín Carstens, head of the Bank for International Settlements (BIS), on Tuesday (Dec. 4).
According to a report in Reuters, Carstens told the newswire service on the sidelines of a banking conference in London that the massive amounts of consumer data that internet companies are gathering gives them an advantage over established banks. He added that they have better information on customers’ spending habits and lifestyles, which they could use to more easily judge the risk of loaning a person money.
“This is very big,” Carstens, who was previously governor of Mexico’s central bank, told Reuters. “This can be an existential threat to some financial intermediation firms, so it is very important for us to get all of this early on and try to steer it without distortions.”
Reuters noted that Alipay, the payment affiliate of Alibaba, is close behind HSBC in terms of its market capitalization, which prompted Chinese regulators to more closely monitor it and WeChat Pay, the digital payment arm of China’s Tencent. There are also rumors swirling that Amazon, Google and Facebook could get into the financial services market in some form.
“Each model is different, but what is universal is the exploitation of information,” Carstens said in the Reuters interview. “Amazon doesn’t have much of an open financial intermediation model; they don’t have a financial arm like Alipay, but there is nothing that prevents them from generating it.”
Carstens noted that it’s not yet clear how much of an advantage these eCommerce, digital payments and internet companies will have with all of the social media and shopping data they have amassed. “We need an open public discussion,” Carstens noted in a speech dubbed “International coordination is the name of the game” during the conference, reported Reuters.