FCA launches consultation on Big Tech in financial services
25 October 2022 UK
Image: AdobeStock/gguy
The UK Financial Conduct Authority has launched a public consultation on whether the entry of big technology (Big Tech) companies into UK financial services will bring beneficial effects for industry stakeholders.
Targeted initially at Big Tech’s impact on retail customers, the discussion will take in wider consequences that will have a crucial impact on efficiency, safety and resilience for institutional investors and financial intermediaries, including those involved in asset servicing and securities financing activities.
The UK financial regulator notes that by combining financial services with their existing businesses, Big Tech can bring highly competitive pricing benefits to customers, driven by greater efficiency, thereby offering desirable competition with existing financial services providers.
In the longer term, however, the FCA also believes that Big Tech could present competition risks if they are able to grow their market share and exploit their significant market power.
The FCA indicates that it does not intend to introduce regulatory changes in the short term, but the consultation process will inform its regulatory treatment of Big Tech firms as a component of a new UK pro-competitive regime for financial markets.
Sheldon Mills, the FCA’s executive director of consumers and competition, says: “In recent years, Big Tech’s entry into financial services, in the UK and elsewhere, has demonstrated its potential to disrupt established markets, drive innovation and reduce costs for consumers.
“Across the world, we have seen the capability of Big Tech to offer transformative new products in areas such as payments, deposits and consumer credit. We want to ensure these benefits are fully realised, while, at the same time, ensuring good consumer and market outcomes. This is vital when we consider the role of Big Tech firms in the provision of key technological infrastructure such as cloud services.”
The FCA indicates that the consultation process launched today will inform its approach to digital markets and the regulator encourages consumers, firms and fellow regulators to engage in this conversation.
Targeted initially at Big Tech’s impact on retail customers, the discussion will take in wider consequences that will have a crucial impact on efficiency, safety and resilience for institutional investors and financial intermediaries, including those involved in asset servicing and securities financing activities.
The UK financial regulator notes that by combining financial services with their existing businesses, Big Tech can bring highly competitive pricing benefits to customers, driven by greater efficiency, thereby offering desirable competition with existing financial services providers.
In the longer term, however, the FCA also believes that Big Tech could present competition risks if they are able to grow their market share and exploit their significant market power.
The FCA indicates that it does not intend to introduce regulatory changes in the short term, but the consultation process will inform its regulatory treatment of Big Tech firms as a component of a new UK pro-competitive regime for financial markets.
Sheldon Mills, the FCA’s executive director of consumers and competition, says: “In recent years, Big Tech’s entry into financial services, in the UK and elsewhere, has demonstrated its potential to disrupt established markets, drive innovation and reduce costs for consumers.
“Across the world, we have seen the capability of Big Tech to offer transformative new products in areas such as payments, deposits and consumer credit. We want to ensure these benefits are fully realised, while, at the same time, ensuring good consumer and market outcomes. This is vital when we consider the role of Big Tech firms in the provision of key technological infrastructure such as cloud services.”
The FCA indicates that the consultation process launched today will inform its approach to digital markets and the regulator encourages consumers, firms and fellow regulators to engage in this conversation.
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