Regulation for Big Tech

Publication Date: 23/07/2020

HOW SHOULD REGULATION ADAPT AS BIG TECH INCREASINGLY ENTERS BANKING?

The International Banking Federation (IBFed) and Oliver Wyman published their joint report titled “Big-Banks-Bigger-Techs-How-policy-makers-could-respond-to-a-probable-discontinuity”. The report shows how authorities worldwide face the difficult challenge of ensuring that regulation and supervision protects consumers and systemic stability while capturing the benefits of innovation and competition. IBFed and Oliver Wyman asked a broad range of industry participants and policymakers across most major markets about their current views and what they viewed as challenges for the future. The markets included the UK, the EU, the US, Australia, Brazil, Canada, China, India, Japan, South Korea and South Africa.

In a few major markets, big techs’ unique scale and ecosystem model hold the potential to fundamentally change competitive dynamics,” said Lisa Quest, Co-author of the report and the Head of Oliver Wyman’s Public Sector & Policy practice for the UK and Ireland. “At the same time, there is also the potential for financial risks to arise outside the current regulatory perimeter.

Hannah Gurga, Managing Director, Digital Technology & Cyber, UK Finance, said: “Technology is transforming many aspects of our lives, including the way we choose to bank and manage our finances. Across the banking and finance sector, firms are investing in new technologies and partnering with fintech operators to develop products and services that better meet the needs of their customers. The entry of big tech into financial services creates new opportunities, but it also brings new risks. As we embark on this next market evolution, consideration is now needed as to how best to maintain the stability, resilience, and consumer protections that are so integral to the banking system.

For the regulation of the financial services market’s next evolution, the report makes three distinct sets of recommendations: revising measures within financial regulation, strengthening the policy response on themes that cut across industries, and extending finance-specific regulations to other industries where inconsistencies in regulation and enforcement have emerged.

Rob Nichols, President and CEO of the American Bankers Association and the current IBFed Chairman, said: “Technology is rapidly changing the way customers connect with their banks. Banks are investing in innovation and partnering with technology companies of all sizes to deliver the latest digital tools to their customers. Increasingly, large diversified technology companies are offering financial services directly to consumers. As this report spells out, these new business models raise questions about the appropriate role of big tech in banking and whether the current regulatory structure can ensure that customers receive the protections they have come to expect from banks.