The UK’s city watchdog is to examine how to regulate ‘big tech’ firms such as Apple, Google and Amazon, fearing they could hurt competition in the UK financial services sector.
The Financial Conduct Authority (FCA) said big tech companies could bring innovations in financial services and reduce costs, but also expressed concerns that they could build dominant positions leading to “the exploitation potential market power,” according to an analysis released Tuesday. .
US tech companies are increasingly eyeing global financial services as they look for ways to use their huge profits, market power and troves of data to disrupt another industry.
Alphabet (the owner of Google), retailer Amazon, Meta (the owner of Facebook) and iPhone maker Apple all already offer financial services in the UK, the FCA said. However, companies are gradually unveiling more products around the world, such as Apple’s credit card and a planned “buy now, pay later” feature. Last week, Amazon launched an online insurance store in the UK.
The FCA analysis said: “The entry of big tech companies into financial services could benefit many consumers.” However, he added that these benefits “could be eroded if these companies can create and exploit ingrained market power to undermine healthy competition and worsen consumer outcomes.”
The FCA said it fears big tech companies will become ‘gatekeepers’ to financial services due to benefits ranging from ‘global scale and large user bases’ to ‘rich data about their users’. ” to the fact that they can set default options on consumers. devices – potentially allowing them to push their own products or exclude others. Google and Apple have already shown that they can quickly become key players in fintech via mobile phone payments.
Sheldon Mills, FCA’s executive director of consumer and competition, said it was important to examine the potential expansion of big tech in financial services “given their scale, the amount of data they have on consumers”.
“It’s not theoretical – it’s clear that big tech is interested in financial services,” he said, pointing to recent developments such as Apple’s purchase of British start-up Credit Kudos and the launch of insurance by Amazon.
The analysis comes after the UK government this year unveiled a “new pro-competition regime for digital markets” which said the market power of some companies had hurt consumers. The FCA said it was not yet proposing any changes to the regulations, but called for responses to its paper by Jan. 15 to “inform its regulatory approach” in light of government policy.
Mills pointed out that the FCA has yet to “see any evidence of specific harms arising from big tech.” However, he said it was important the regulator started talking to these companies given the likelihood of some of them entering the UK market. Vast profits meant big tech companies “could support large-scale entry if they chose to,” he added.
The FCA paper also highlighted the potential risk of big tech companies using their data – in many cases designed for use in targeted advertising – in decisions about which financial services products to offer. He said there was a risk that the insurance industry could be undermined if data “is used in a negative way in insurance underwriting, thereby affecting access to insurance for specific cohorts of consumers. “.
Mills said the FCA wants to make sure companies “adopt the right frameworks based on trust and ethics”, and that “biases or other areas don’t start to feed or seep into the use of AI or machine learning”.
“It’s always about balancing those risks of bias and discrimination” against the potential “massive benefits” that big tech companies could bring to financial services, Mills said.