As Facebook Inc., Alibaba Group Holdings Ltd. and big technology firms march deeper into the financial system, the world’s top central bankers say new restrictions may be needed to ensure they compete fairly with traditional lenders.
The Bank for International Settlements, known as the bank for central bankers, said in a report on Sunday that regulators should take a more comprehensive approach and extend their focus to how tech companies can exploit customer data in anti-competitive ways.
“Big techs are still a fairly small part of the financial-services industry at the moment, but they have the potential to spark rapid change,” said Hyun Song Shin, economic adviser and head of research at the BIS, which is based in Basel, Switzerland. “Big techs raise concerns that are more the traditional domain of competition authorities and data-privacy regulators, and to make that coordination there would need to be more of a concerted effort on the part of our political leaders.”
The report from central bankers comes only a few days after Facebook rolled out an ambitious plan for its own cryptocurrency. Facebook’s Libra coin is still months away from being used, but regulators are already beginning to scrutinize the project and warning that rules must be applied.
The BIS said big tech firms’ troves of data on their massive user bases suggest the need for privacy rules to level the playing field with banks. Without safeguards, technology companies could sell their own products at low costs while charging steep fees to financial firms wanting to pitch similar services on the tech platforms.
While large banks have plenty of data, their ability to compete is hampered by outdated technology and restrictions, the BIS said. Big tech firms, meanwhile, can amass data more cheaply, grow faster and keep costs low, all of which could help provide financial services to customers who have trouble accessing conventional banks, the BIS said.