On the heels of Libra, banking institution are weighing in on the big tech threat to legacy financial services.
Officials at the Bank for International Settlements (BIS) caution that big tech firms could dominate the global financial services market, a development they say may lead to competition and data privacy issues.
The BIS, an international financial institution owned by 60 of the world’s central banks, released a report on Sunday laying out the potential positives and negatives of big tech’s blossoming entry into the financial services ecosystem.
BIS officials note that big tech’s involvement in financial services currently is quite limited, though they say the tech industry’s customer reach, data access and size could soon “spark rapid change” in the world of finance.
The report dropped less than a week after Facebook announced Libra, its new cryptocurrency, though the document only mentions the upcoming coin and crypto once, in an endnote. The researchers also steer clear of fintech Ripple, the blockchain-based, cross-border solutions company that recently partnered with incumbent MoneyGram which is gearing up to power its “digital transformation” by using the cryptocurrency XRP.
Among several tech giants, the researchers mention Alibaba, Amazon, Facebook, Google and Tencent.
BIS officials do believe that big tech’s reach could increase the efficiency of the financial services industry. Says the report,
“Big techs’ low-cost structure business can easily be scaled up to provide basic financial services, especially in places where a large part of the population remains unbanked. Using big data and analysis of the network structure in their established platforms, big techs can assess the riskiness of borrowers, reducing the need for collateral to assure repayment.”
However, the institution’s researchers also think big tech firms’ entry into finance could heighten a host of familiar challenges,