The global body of financial regulators says that Big Tech’s growing prominence has raised questions over their financial stability and data privacy. The dominance of Big Tech has generated a series of concerns: Can their market power be economically harmful to other financial institutions? If so, what are the right remedies or policy changes that need to be implemented?
Financial Stability Board highlights that Microsoft, Apple, Alibaba, Baidu, and Tencent, among others, have massive databases to back up their financial services moves. The Financial Stability Board (FSB) confirms that the pervasion of big tech firms in the finance industry will definitely enhance the efficiency of financial services. But, the associated risks for financial stability cannot be ignored. Competition amongst these Big Tech giants and the other financial bodies will remain the key concern.
Going by market capitalization, as per data in May, Amazon and Apple were worth well over $900 billion each. Google’s owner Alphabet was accounting for over $800 billion, and Facebook had a valued well over $500 billion. The tech company valued above all undoubtedly was Microsoft, which witnessed a resurgence in recent years. Microsoft still leads, even after being sued for about two decades for antitrust violations. Even if Microsoft barely escaped the data security accusations being broken into two, it still remains the world’s top company by market capitalization. As per the research by eMarketer, Google, and Facebook together control about 60% of the digital ad spending in the U.S. Taking about the e-commerce industry, nearly half of all e-commerce goes through Amazon. Over 70% of the entire Internet traffic goes through sites operated or owned by Google or Facebook.
As per FSB, Google, Alibaba, and other “Big Tech” giants need to be share data on financial services customers with banks to prevent unfair competition. As Facebook’s Libra faces scrutiny, FSA has become more alert about not letting the concentrated power lie in the hands of a few Big Tech companies. The FSB called in a report released for “vigilant monitoring” of Big Tech’s sudden shift into financial services. FSB continued claiming that this could crimp the ability of banks to generate capital through profit retention.
Though this is only “nascent” in most countries, Big Tech in countries like China has brought financial services within reach of under-served communities. The FSB said global players, including Microsoft, Amazon, Facebook eBay, Baidu, Apple, and Tencent, maintain massive databases; some already offer asset management, payments, and lending services. And, this will undoubtedly undermine the future of other financial bodies and especially banks.
Many of these Big Tech firms like Facebook, eBay, Alipay, Amazon, and Google have already acquired payments-related licenses in the EU. But, most of them have not yet built up any significant volumes. Banks in Europe and elsewhere are required to share customer data with third party “FinTech” firms that wish to offer rival payments services. Thus, FSB agrees that it is fair that the same should be done by Big Tech firms as well.
The ability of Big Tech firms’ to leverage customer data raises a crucial question of whether and to the extent at which the mobility of data between these financial actors can be trusted. Regulators need to focus on “activities that may have implications for financial stability” rather than focusing solely on the size of the firm. Data sharing between them will not only help encourage competition but also ensure a level playing field among the major market participants of the global financial market.