Platform-based business models and financial inclusion

BIS Working Papers  |  No 986  | 
10 January 2022



New players in finance include fintech and big tech firms with digital platforms in e-commerce, search or social media. Increasingly, incumbent financial institutions are also adopting platform-based business models. Digital platforms operate in multi-sided markets, using big data to match different groups of customers (eg users and providers). This paper assesses how these models can affect financial inclusion, competition, financial stability and consumer protection.


We apply insights from the theory of platform economics to the experience with digital platforms, considering their impact on policy objectives. We show that the same forces that help platforms to lower costs and enhance financial inclusion can also give rise to digital monopolies. We document the rise of digital platforms in selected financial services around the world, including both progress on financial inclusion and the new policy concerns around competition, financial stability and consumer protection. We assess three broad policy approaches to harness the benefits of digital platforms while mitigating policy risks.


We show that platforms have helped to achieve impressive gains in financial inclusion, both in emerging market and developing economies and in advanced economies such as the United Kingdom. We also show evidence of the tendency of digital platforms to dominate specific markets. We argue that an ex ante policy approach to competition, data portability and public infrastructures (eg for digital identity, retail fast payments and potentially central bank digital currencies) can be promising. We argue that regardless of the approach chosen, coordination by central banks and financial regulators with competition and data protection authorities is warranted.


Three types of digital platforms are expanding in financial services: (i) fintech entrants; (ii) big tech firms; and (iii) increasingly, incumbent financial institutions with platformbased business models. These platforms can dramatically lower costs and thereby aid financial inclusion – but these same features can give rise to digital monopolies and oligopolies. Digital platforms operate in multi-sided markets, and rely crucially on big data. This leads to specific network effects, returns to scale and scope, and policy trade-offs. To reap the benefits of platforms while mitigating risks, policy makers can: (i) apply existing financial, antitrust and privacy regulations, (ii) adapt old and adopt new regulations, combining an activity and entity-based approach, and/or (iii) provide new public infrastructures. The latter include digital identity, retail fast payment systems and central bank digital currencies (CBDCs). These public infrastructures, as well as ex ante competition rules and data portability, are particularly promising. Yet to achieve their policy goals, central banks and financial regulators need to coordinate with competition and data protection authorities.

JEL classification: E51, G23, O31.

Keywords: financial inclusion, fintech, big tech, platforms.