The Financial Conduct Authority (FCA) is asking its members to reflect and feed back on the likely benefits and negatives of Big Tech businesses such as Apple, Microsoft, Amazon and Google, expanding their operations in the finance sector. In a paper that has just been released, it identifies four areas where companies of this size, if not already active, are likely to make inroads in the next few years, and to analyse the thoughts of industry members who may have concerns.
Their huge digital platforms offer the capacity for rapid expansion of their already well-established infrastructure. Indeed, they are already experienced in “providing financial services and have been active in the payments and lending sectors,” with FCA permissions according to the authority. Their presence could bring healthy advantages to a competitive market, especially to motivate smaller Fintech firms to really push for that extra innovation to set them ahead. Equally, the FCA is showing it is wary of “competition risks arising from them rapidly gaining market share, markets ‘tipping’ in their favour, and potential exploitation of market power.”
The effects of any competition often bring benefits to the consumer, especially in terms of costs and service. But the sheer enormity of these technology giants: their well-known branding and reputation; their worldwide expertise in promotion and advertising; their infrastructural potential to scale up rapidly; their investment in AI research and development in a sector where technology is increasingly important, there is understandable cause for concern in banking.
Their considerable strength elsewhere has already caused governments in territories of interest to them to develop a range of ex-ante competition laws and regulations. In the UK, the Furman Review has resulted in the Digital Markets Unit (DMU) to ensure fair competition guidance is met. Similarly, the EU is introducing its Digital Markets Act which will limit the anticompetitive muscle-flexing of ‘gatekeeper’ companies. These are large digital companies that sit between business and end users that are set to gain huge economies of scale. In the US, the new Technology Enforcement Division (TED) by the Trade Commission is monitoring competition in the digital markets, while politicians wrangle over what new laws are are required. Similar initiatives are taking shape in Australia, South Korea and Japan as governments of the world’s largest financial centres seek to maintain control of the Big Tech potential.
The FCA anticipates that the discussion paper will be of interest to a wide-range of interested parties including consumers and consumer trade bodies, firms in the regulated financial services sector, smaller fintech firms, trade bodies, and competition regulators both at home and internationally.
All contributions are welcomed via email and post, details of which are also provided in the paper in the link below.