Big Tech firms like Apple, Amazon and Google have been making waves in the fintech industry for years. Now it seems as if regulators are waking up to the risks that may entail.
The Bank for International Settlements (BIS), an umbrella group for the world’s central banks, has called upon central banks and financial regulators to be more alert to how massive tech companies can shape financial services. The organisation noted that companies like Google, Facebook and Amazon could easily scale thanks to their massive treasure troves of data.
Back in May when Verdict reported on the meteoric rise of PayPal’s profits during the pandemic, we reported that Big Tech’s entry into the fintech sector would likely invite more regulatory scrutiny. And now, here another crackdown seems to be proving the point.
The BIS warned in a new paper on Monday about how unchecked tech firms could end up dominating the market, Reuters reported. The paper noted how, in China, Alipay and WeChat Pay now account for 94% of the mobile payments market.
“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,” the BIS paper said.
The report came on the back of Big Tech firms having pushed further into the fintech space in recent years.
Apple is, for instance, rumoured to be eyeing the highly lucrative buy-now-pay-later (BNPL) market, putting it at potential loggerheads with Klarna. The BNPL market is expected to be worth $166bn by 2023, according to GlobalData’s Thematic Research.
Google, similarly, expanded its payment solutions in May by offering cross-border payments. The move put it at a potential collision course with challenger banks like Revolut that have made a name for themselves partly through low-fee cross-border transactions.
Developments like these were highlighted as cause for concern, and the BIS has encouraged regulators and central banks to closely monitor Big Tech as they push further into the fintech industry.
“The entry of big tech firms into the payment system has underscored how rapidly digital innovation can impinge on central banks’ traditional concerns: sound money and the smooth functioning of the payment system,” the BIS paper said.
“Given the multi-faceted nature of the public policy challenges that extend to competition and data governance imperatives, central banks and financial regulators should invest with urgency in monitoring and understanding these developments.”
The news comes as regulators around the world are already hard at work reeling in the power of Big Tech, and not just in the fintech industry.
In China, Beijing has clamped down hard on Big Tech firms in recent months. The crackdown includes the highly publicised probe into Didi Chuxing just days after the ride-hailing company went public in the US. The Cyberspace Administration of China said it would launch an investigation into the company, citing illegal collection of users’ personal data, at the beginning of July.
Beijing has also taken steps to make it harder for Chinese firms to list abroad and probes into some of its biggest domestic firms, including Tencent and Alipay.
In Europe, the EU is pushing the Digital Markets Act and the Digital Services Act through the corridors of Brussels. The new laws are aimed at levelling the playfield on the digital market.
The European Commission has also launched several antitrust cases against companies like Apple and Google in recent months.
In the US, the Biden administration has also taken steps to reel in Big Tech firms, including pushing for a global corporate tax and funnelling five new bills through the senate to break Silicon Valley’s chokehold over the economy.