Image credits: BIS.ORG
News Article

BIS Calls for Urgent Regulation of Big Tech

By Cinthya Alaniz Salazar | Wed, 08/04/2021 - 11:23

Central bank umbrella group Bank for International Settlements (BIS) emphasized the urgent need for Big Tech regulation in the finance sector, citing traditional financial stability concerns, excessive concentration of market power and data governance.

Big tech companies Facebook, Google, Amazon and Alibaba have long been scrutinized by global watchdogs for data collection, which they are now utilizing to break into the financial services sector with precision. BIS warns that given their existing business model these companies can rapidly scale up through a ‘data-network-activities’ (DNA) loop, thereby giving rise to concerns about excessive market power and integrity of the monetary system.

To demonstrate just how quickly Big Tech firms can establish their footprints, the report pointed to the Chinese market in which Alipay and Tenpay (WeChat and QQ Wallet) controlled less than 30 percent of transactions in 2015, just five years later and they now account for 94 percent of all mobile payments.

The Chinese State Council has been proactive, issuing anti-monopoly guidelines and introducing rules preventing restrictive practices by non-bank payment service providers. Last November it went as far as thwarting the IPO of digital financial technology platform, Jack Ma’s fintech Ant Group, thereby giving market players an unmistakable message.

It appears that these companies are attempting to break beyond payments by becoming lenders to individuals and small businesses, and in some markets offering insurance and wealth management services. These activities are outside of the current regulatory framework of the financial services sector, for which providers must hold licenses for specific business lines.

“Even in those jurisdictions where big techs do not currently have a dominant position in the financial system, their potential for rapid growth warrants close attention from central banks.” The report said in address to stablecoin projects and other initiatives that could be a monetary system “game changer.”

Going forward BIS recognizes the need for “close coordination on the part of the central bank with data governance regulators” so that they may contribute analysis on open banking and other data portability rules, protocols regarding data transfers and the role of public infrastructures. As of now China, the US and the EU are leading regulatory initiatives, but given how quickly tech giants can alter the existing market it is imperative that other emerging economies get on board so as to avoid market concentration and entrenchment.

The data used in this article was sourced from:  
Photo by:   BIS.ORG
Cinthya Alaniz Salazar Cinthya Alaniz Salazar Journalist & Industry Analyst