By Marc Jones
LONDON (Reuters) – Central banks and financial regulators urgently need to get to grips with the growing influence of ‘Big Tech’, according to top officials from central bank umbrella group the Bank for International Settlements (BIS).
Global watchdogs are increasing wary that the huge amounts of data controlled by groups such as Facebook, Google, Amazon and Alibaba could allow them to reshape finance so rapidly that it destabilises entire banking systems.
In many other jurisdictions, tech firms are rapidly establishing footprints too, with some also lending to individuals and small businesses as well as offering insurance and wealth management services.
“The entry of big techs into financial services gives rise to new challenges surrounding the concentration of market power and data governance,” the BIS paper published on Monday said.
There was scope for “specific entity-based rules” notably in the European Union, China and the United States, it added.
“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.”
GRAPHIC: Big Tech’s rapid growth in users underpins their dominance in some markets – https://fingfx.thomsonreuters.com/gfx/mkt/mypmnmqmwvr/Pasted%20image%201627894711247.png)
Stablecoins – cryptocurrencies pegged to existing currencies – and other Big Tech initiatives could be “a game changer” for the monetary system, the paper added, if their entry leads to closed-loop systems reinforced by network effects from data drawn from social media or e-commerce platforms.
It could lead to a fragmentation of payment infrastructures to the detriment of the public good. “Given the potential for rapid change, the absence of currently dominant platforms should not be a source of comfort for central banks,” the paper said.
It said they should anticipate developments and formulate policy based on possible scenarios where Big Tech initiatives are already reshaping payments and other parts of financial systems.
“Central banks and financial regulators should invest with urgency in monitoring and understanding these developments” it added. “In this way, they can be prepared to act quickly when needed.”
(Reporting by Marc Jones; Editing by Mark Potter)