Reserve Bank of India warns against Big Tech's potential to dominate financial services

Don't be allured by the siren sound of inclusion and lasting efficiency gains, says report


The Reserve Bank of India (RBI) warned about Big Tech's potential to dominate the financial services sector and overrun banks in its Financial Stability Report released yesterday.

Listed alongside climate-related risks, cyberattacks, and increased competition from the entry of fintechs, the semi-annual financial report described the growing presence of Big Tech in financial services as a challenge for banks.

These days the tech giants are doing more than just dabbling – they have a wide footprint in digital financial services including payment systems, crowdfunding, asset management, banking and insurance.

According to the Bank of International Standards [PDF], Amazon offers credit provision, payments, crowdfunding, and insurance, while Google, Apple, and Facebook all offer payments and Google is expanding into banking.

Compared to US Big Tech, China is way ahead of the financial services game. Alibaba's Ant Group, Baidu, JD.com, and Tencent all provide banking, credit provision, payments, crowdfunding, asset management, and insurance.

App-based digital banking understandably eats into the market share for traditional banks.

RBI, India's central bank, said that while Big Tech's services support financial inclusion, generate lasting efficiency gains, and encourage competitiveness in banks, the industry giants do not operate on a level playing field with banks and create policy issues.

The big concerns, said RBI, are that tech companies operating as financial services do not have clear enough governance structures due to their broad business plan, have the potential to dominate, and can exploit their broader network to scale in financial services provision in an unfair manner.

The organisation would prefer to see specialised regulation for Big Tech in the financial sphere and states a need for international rules and standards as the digital economy goes global.

China has recently cracked down on homegrown tech companies acting as financial service companies, having forced Alibaba's Ant Group to restructure its consumer loans business before allowing it to operate in such a capacity.

India has also tightened the reins on tech firms as of late. Last week, the government proposed a ban on e-commerce sites discounting own-brand goods and the Indian Competition Commission launched an antitrust probe into Google's smart televisions. Indian politicians have recently ordered the takedown of social media posts, and complained about the takedown of social media posts.

Last month, the Indian government told Twitter to stop offshoring and outsourcing or risk losing legal protections. And earlier this year, Amazon Prime's India head of content faced legal troubles for the company's in-country airing of material deemed offensive. ®

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