Finance chiefs warn on Big Tech's shift to banking
Big Tech’s move into banking is threatening financial stability and the biggest US and Chinese technology groups should be subject to some of the same regulation as big banks, according to top European finance chiefs.
Europe’s introduction this year of “open banking” regulation, which forces lenders to provide access to accounts of customers who authorise it, has left senior bankers worrying that tech groups will cherry-pick the best parts of their business.
Francisco González, executive chairman of Spanish bank BBVA, has warned that groups such as Facebook and Amazon in the US, and Alibaba and Tencent in China will “replace many banks”. He called on a global body such as the G20 to take action, saying “authorities [need] to bring order to this massive change” that could “pose risks to financial stability”.
Banks will be at a disadvantage as they face intensifying competition from Big Tech groups because of uneven regulation between the two sectors, Mr González said, adding: “If I need capital to lend then let’s have the same rules for everyone — for the internet giants too.”
There is clearly a mood that says these [tech] groups have to take more responsibility for their content, services and data
Having dabbled in financial services for years, Big Tech groups are deepening their activity in the sector. Amazon is providing payment services and loans to merchants on its platform, while Facebook recently secured an electronic money licence in Ireland. Alibaba and Tencent have become dominant operators in China’s $5.5tn payments industry.
Ralph Hamers, chief executive of Dutch bank ING, said new European “open banking” regulation had opened the door to Big Tech entering the market. “That is a threat to banks — because they have much more money to burn,” he told the FT.
“If they get this data they will go full circle as they don’t currently have transactional data on what people buy,” he added. “As a society we should think about that concentration of power.”
Big Tech has been criticised recently for a number of issues, ranging from enabling Russian election meddling, tax-avoidance, anti-competitive behaviour and publishing extremist content.
“There is clearly a mood that says these groups have to take more responsibility for their content, services and data that they have on people,” Bruce Carnegie-Brown, chairman of the Lloyds’ of London insurance market, told the FT.
“I think we have reached a tipping point, whether it is with Amazon or Facebook, cyber security or data protection,” said Mr Carnegie-Brown, who is also vice-chairman of Spain’s Banco Santander and chairman of UK price comparison site Moneysupermarket.com. “We should be looking at them at an international level.”
Mr González, who is due to retire from BBVA next year, said: “Today . . . banks are responsible for whatever happens within banks. That same level of responsibility has to be applied to the platforms that the internet giants are deploying, and for that we need a different legal architecture.”
Google, Amazon and Microsoft are hosting a rapidly rising portion of the world’s financial data at their cloud computing divisions. As banks look to automate more of their operations using artificial intelligence, they will become even more reliant on Big Tech groups.
“The providers [of AI services] are going to be the big platform companies — Google, Amazon and Alibaba — so will there be systemic risk around those companies?” asked Richard Lumb, head of financial services at Accenture, the consultants.