Big Tech and Finance Pose Regulatory Challenges
In recent years big tech firms have grown increasingly active in the financial industry. Starting out with payments, then expanding into credit, now insurance and wealth management.
Augustin Carstens, general manager at the Bank for international Settlements (BIS) spelt out some concerns in a speech at the FT Banking Summit in December, asking “Is the expansion of big tech powered by innovative efficiency gains, or by the cost advantage of circumventing the current regulatory system?”
If big tech success in these fields is driven by efficiency, it could promote financial inclusion and create a more diverse financial system. However, Carsten notes that ‘if big tech entry is driven primarily by market power, relying on exploiting regulatory loopholes and the bandwagon effects of network externalities, this could encourage banks into new forms of risk-taking.’
The rapid growth of big tech presents both opportunities and potential risks. What Carstens makes clear is that regulators have to provide a secure playing field for all participants, avoiding regulatory gaps that could lead to instability.
A thought provoking speech. What are the reporting implications? Read it in full here.
