Global banking regulators say the arrival of Big Tech firms like Google, Amazon and Apple in financial services poses a host of stability risks that may require sweeping new laws to level the playing field with smaller tech firms and banks.
The report by the Financial Stability Board acknowledges that the entry of Big Tech firms into finance has numerous benefits, including the potential for greater innovation, diversification and efficiency in the provision of financial services.
"However, Big Tech firms may also pose risks to financial stability," states the report.
Some risks are similar to those from financial firms more broadly, stemming from leverage, maturity transformation and liquidity mismatches, as well as operational risks.
More worrying is Big Tech's capacity to scale and ultimately come to dominate given their significant resources and widespread access to customer data.
The FSB hints that the imposition of Open Banking rules that force incumbent financial services firms to share customer data with third party providers, may have to shift into reverse in the case of Big Tech, to create a more level-playing field for banks and smaller fintech firms to compete.
“Big Tech firms’ ability to leverage customer data raises the question of whether - and the degree to which - authorities could consider the potential to promote the mobility of data between the various actors that are involved in the provision of financial services,” the FSB states. “Doing so may help encourage competition and help ensure a level playing field amongst market participants.”
The FSB says regulators and supervisors also need to be mindful of the resilience and the viability of the business models of incumbent firms given interlinkages with, and competition from, Big Tech firms.
Similarly, third-party dependencies in cloud services create a number of operational, governance and oversight considerations, the FSB believes, particularly in a cross-border context linked to the potential concentration of Big Tech providers, like Amazon, Google and Microsoft.
While there do not appear to be immediate financial stability risks stemming from the use of cloud services by financial institutions, the FSB remains in watchful mode, suggesting that further assessment of regulatory standards, information sharing and interoperability across cloud providers could be merited.