As a way to prevent unfair competition, the Financial Stability Board (FSB) said in a report on Sunday (Dec. 8) that there should be “vigilant monitoring” of Big Tech’s move into financial services. Firms like Google, Alibaba and Facebook could be forced to share data with banks and FinTech firms.
Asset management, payments and lending are being offered by Microsoft, Amazon, eBay, Baidu, Apple, Facebook and Tencent — all which have colossal databases. Banks are required to share customer data with rival FinTech firms, and “this may need to be the case with Big Tech, too,” the FSB said in the report.
BigTech’s entry into finance has had benefits, like financial inclusion in emerging markets and underbanked economies. However, there could be risks to financial stability.
“Some risks are similar to those from financial firms more broadly, … [stemming] from leverage, maturity transformation and liquidity mismatches, as well as operational risks,” the report said.
Many companies — like Amazon, Facebook, eBay, Alipay and Google — have acquired payments-related licenses in Luxembourg, Ireland, Lithuania and other EU countries.
“Big Tech firms’ ability to leverage customer data raises the question of whether — and the degree to which — authorities could consider the potential to promote the mobility of data between the various actors that are involved in the provision of financial services,” the FSB said. “Doing so may help encourage competition, and help ensure a level playing field amongst market participants.”
Regulators may also need to replicate their approach to insurers and asset managers by focusing on “activities that have implications for financial stability,” rather than a sole focus on the size of the firm, the FSB added.
Last month, ongoing security concerns prompted the Federal Reserve to further scrutinize Big Tech firms that serve the banking industry. The Fed is considering an audit of Big Tech firms’ compliance policies and governance structures. The probe would concentrate on tech firms that provide data storage to financial institutions.