Financial regulators urgently need to get a grip on ‘Big Tech’ -BIS
LONDON (Reuters) – Central banks and financial regulators urgently need to get to grips with the growing influence of ‘Big Tech’, according to top officials from central bank umbrella group the Bank for International Settlements (BIS).
Global watchdogs are increasingly wary that the huge amounts of data controlled by groups such as Facebook, Google, Amazon and Alibaba could allow them to reshape finance so rapidly that it destabilises entire banking systems.
The BIS, in a paper led by its head Agustin Carstens, pointed to examples such as China where the two big tech payment firms Alipay and WeChat Pay now account for 94% of the mobile payments market.
China has already rattled its markets with a series of clampdowns here on top tech and e-commerce firms. Last November regulators torpedoed the public listing of Jack Ma’s fintech Ant Group and in the nine months since other tech giants and, lately, tutoring firms, have all faced scrutiny.
In many other jurisdictions too, tech firms are rapidly establishing footprints, with some also lending to individuals and small businesses as well as offering insurance and wealth management services.
“The entry of big techs into financial services gives rise to new challenges surrounding the concentration of market power and data governance,” the BIS paper www.bis.org/publ/bisbull45.pdf published on Monday said.
There was scope for “specific entity-based rules” notably in the European Union, China and the United States, it added.
“Any impact on the integrity of the monetary system arising from the emergence of dominant platforms ought to be a key concern for the central bank.”
Stablecoins – cryptocurrencies pegged to existing currencies such as Facebook’s Diem – and other Big Tech initiatives could be “a game changer” for the monetary system, the paper added, if the “network effects” of social media and e-commerce platforms turbo-charged their uptake.
It could lead to a fragmentation of existing payment infrastructures to the detriment of the public good. “Given the potential for rapid change, the absence of currently dominant platforms should not be a source of comfort for central banks,” the paper said.
It said they should anticipate developments and formulate policy based on possible scenarios where Big Tech initiatives are already reshaping payments and other parts of financial systems.
“Central banks and financial regulators should invest with urgency in monitoring and understanding these developments” it added. “In this way, they can be prepared to act quickly when needed.”
Reporting by Marc Jones; Editing by Mark Potter and Susan Fenton