Public policy for big techs in finance
The rise of big tech has underscored how rapidly digital innovation can disrupt markets, leading to concerns around systemic importance. The risks and policy challenges posed by big techs cannot be fully addressed by piecemeal activity-based regulations - we have to go one step further.
Public policy for big techs in finance
Eli Remolona (moderator), Agustín Carstens (General Manager), Robert Merton (MIT)
21 January 2021
The entry of large technology firms (big techs) into financial services holds the promise of efficiency gains and can enhance financial inclusion. But the growth of their services raises questions on whether and how the regulatory framework needs to adjust. In particular, big techs use data to offer a range of services that exploit network effects, generating further user activity that generates even more data. This dynamic, which the BIS has dubbed the "data-network-activities"– or "DNA" – loop, gives big techs with an established platform a head start when they venture into financial services. This brings benefits, but also costs associated with market power, operational resilience and data privacy. Public policy regarding big techs in finance thus needs to build on a more comprehensive approach that combines financial regulation, competition policy and data privacy. Such an approach would also support a level playing field between big techs and traditional financial service providers.