The Financial Stability Board says that the Covid pandemic has enabled Big Tech firms like Google, Amazon and Apple and fintechs to widen their footprint in financial services, with significant implications for incumbents and consumers.
The FSB report acknowledges that Big Tech and fintech firms’ expansion into financial services can bring benefits such as improved cost efficiencies and wider financial inclusion for previously underserved groups. However, it also cautions over the potential for market dominance.
"There could be negative financial stability implications from dependence on a limited number of Big Tech and fintech providers in some markets, the complexity and opacity of their partnership activities, and potential incentives for risk taking by incumbent financial institutions to preserve profitability," states the report. "There could also be consumer protection risks from greater dependency on technology and data protection issues. In addition, the limited number of cloud service providers could magnify the impact of any operational vulnerability.
The FSB says that the growth of Big Techs in particular underscores the need to address data gaps that currently hamper the assessment of those firms’ financial risks and systemic importance.