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 companies such as Apple, Amazon, Google and Facebook’s parent Meta’s impact on retail financial services. the consultation has widened to incorporate institutional investors and financial intermediaries, including those involved in asset servicing and securities financing activities.
In a market analysis the UK financial regulator notes that by combining financial services with their existing businesses, big tech could bring efficiencies or lower prices, as well as opening up access to people who are underserved by existing providers.
It added that the US behemoths could also encourage traditional financial services firms in the UK to embrace digital technologies more quickly.
However, in the longer term, the FCA said, “Based on evidence in Big Tech firms’ core markets and their expanding ecosystems, there are competition risks arising from them rapidly gaining market share, markets ‘tipping’ in their favour and potential exploitation of market power.”
The watchdog 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.
“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,” says Sheldon Mills, the FCA’s executive director of consumers and competition.
He added, “We want to ensure the 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 also suggested that tech companies should share their prized customer data with traditional providers.
“We would be concerned if data can be used exclusively by big tech firms, who are also able to place data access restrictions on incumbent providers or potential entrants,” the FCA said,
It added, “Big Tech firms’ access to unparalleled data, and an ability to combine data across their ecosystems provides them with a unique competitive advantage that incumbents and fintechs do not possess.”
No regulatory changes are being proposed “at this stage”. Responses to the FCA can be submitted until January 15 2023 and the agency expects to issue a feedback statement in the second half of next year.