While comprehensive data on the market shares of FinTechs, BigTechs and incumbent financial institutions in retail digital financial services are scarce, proxies suggest that BigTechs and larger FinTechs have further expanded their footprint in financial services.
The Financial Stability Board (FSB) published today a report about FinTech and Market Structure in the COVID-19 Pandemic.
The main finding of the report is that the pandemic has accelerated
the trend toward digitalisation of retail financial services. While
comprehensive data on the market shares of FinTechs, BigTechs and
incumbent financial institutions in retail digital financial services
are scarce, proxies suggest that BigTechs and larger FinTechs have
further expanded their footprint in financial services.
The report notes that BigTech and FinTech firms’ expansion into
financial services can bring benefits such as improved cost efficiencies
and wider financial inclusion for previously underserved groups.
However, it also cautions over the potential for market dominance. In
some markets, concentration measures are high, but there is no evidence
yet of a generalised increase.
There could be negative financial stability implications from
dependence on a limited number of BigTech and FinTech providers in some
markets, the complexity and opacity of their partnership activities, and
potential incentives for risk taking by incumbent financial
institutions to preserve profitability. There could also be consumer
protection risks from greater dependency on technology and data
protection issues. In addition, the limited number of cloud service
providers could magnify the impact of any operational vulnerability.
The growth of BigTechs in particular underscores the need to address
data gaps that currently hamper the assessment of those firms’ financial
risks and systemic importance. Such data gaps make it difficult for
authorities to decide whether and how to regulate BigTechs.
The report outlines the types of actions authorities have taken
during the pandemic that may impact market structure and the role of
different firms in providing digital financial services. These actions
relate to financial stability, competition, data privacy and governance
issues. The report also stresses the importance of cooperation between
financial authorities and, where relevant, with competition and data
protection authorities.
Notes to editors
The report published today is part of the FSB’s ongoing work to
monitor market developments and assess the financial stability
implications raised by FinTech. Previous reports cover BigTech firms in finance in emerging market and developing economies, the use of supervisory and regulatory technology by FSB member authorities and regulated institutions, and market developments and potential financial stability implications from BigTech in finance.
FSB
© FSB - Financial Stability Board
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