An international body of financial regulators has warned that that the increasing activity of Big Tech firms in the financial sector may pose risks to global financial stability.
The Financial Stability Board (FSB) said in a recent report that competition from tech firms such as Google, Facebook, and China’s Alibaba might “reduce the resilience of financial institutions, either by affecting their profitability or by reducing the stability of their funding.”
“The financial services offerings of BigTech firms could grow quickly given their significant resources and widespread access to customer data, which could be self-reinforcing via network effects,” the FSB said in its report. “An overarching consideration is that a small number of BigTech firms may in the future come to dominate, rather than diversify, the provision of certain financial services in some jurisdictions.”
The FSB released its report as tech companies begin to step up the development of financial products that are increasingly being scrutinised by regulators, such as Facebook’s planned Libra cybercurrency. The FSB has urged policymakers to continue to monitor the shift of tech firms into financial services.
“The entry of BigTech firms into financial services raises a range of issues for policymakers,” the report said. “The potential for BigTech firms to achieve scale in financial services very rapidly highlights an overarching need for policymakers to stay abreast of developments, and their implications for systemic risk.”