Big Tech and Fintech are tightening their grip on financial services

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The Financial Stability Board says the Covid pandemic has allowed big tech companies like Google, Amazon and Apple and fintechs to expand their footprint in financial services, with significant implications for incumbents and consumers.

The FSB report recognizes that the expansion of Big Tech and fintech companies into financial services can bring benefits such as improved profitability and greater financial inclusion for previously underserved groups. However, he also warns of the potential for market dominance.

“The reliance on a limited number of Big Tech and fintech vendors in some markets, the complexity and opacity of their partnering activities, and the potential incentives for incumbent financial institutions to take risk to preserve profitability could have negative implications for financial stability,” the report states. “There could also be consumer protection risks due to greater reliance on technology and data protection concerns. Additionally, the limited number of cloud service providers could amplify the impact of any operational vulnerabilities.

The FSB says the growth of Big Techs in particular underscores the need to close the data gaps that currently hamper the assessment of the financial risks and systemic importance of these companies.

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