BigTech and the Changing Structure of Financial Intermediation

45 Pages Posted: 9 Apr 2019

See all articles by Jon Frost

Jon Frost

Bank for International Settlements (BIS) - Financial Stability Board (FSB); De Nederlandsche Bank

Leonardo Gambacorta

Bank for International Settlements (BIS); Centre for Economic Policy Research (CEPR)

Yi Huang

Graduate Institute of International and Development Studies

Hyun Song Shin

Bank for International Settlements (BIS)

Pablo Zbinden

Mercado Libre

Date Written: April 9, 2019

Abstract

We consider the drivers and implications of the growth of "BigTech" in finance - ie the financial services offerings of technology companies with established presence in the market for digital services. BigTech firms often start with payments. Thereafter, some expand into the provision of credit, insurance, and savings and investment products, either directly or in cooperation with financial institution partners. Focusing on credit, we show that BigTech firms lend more in countries with less competitive banking sectors and less stringent regulation. Analysing the case of Argentina, we find support for the hypothesis that BigTech lenders have an information advantage in credit assessment relative to a traditional credit bureau. For borrowers in both Argentina and China, we find that firms that accessed credit expanded their product offerings more than those that did not. It is too early to judge the extent of BigTech's eventual advance into the provision of financial services. However, the early evidence allows us to pose pertinent questions that bear on their impact on financial stability and overall economic welfare.

Keywords: BigTech, FinTech, Credit Markets, Data, Technology, Network Effects, Regulation

JEL Classification: E51, G23, O31

Suggested Citation

Frost, Jon and Gambacorta, Leonardo and Huang, Yi and Shin, Hyun Song and Zbinden, Pablo, BigTech and the Changing Structure of Financial Intermediation (April 9, 2019). BIS Working Paper No. 779. Available at SSRN: https://ssrn.com/abstract=3369011

Jon Frost (Contact Author)

Bank for International Settlements (BIS) - Financial Stability Board (FSB) ( email )

Basel
Switzerland

De Nederlandsche Bank ( email )

PO Box 98
1000 AB Amsterdam
Amsterdam, 1000 AB
Netherlands

Leonardo Gambacorta

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Yi Huang

Graduate Institute of International and Development Studies ( email )

PO Box 136
Geneva, CH-1211
Switzerland

Hyun Song Shin

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

HOME PAGE: http://www.bis.org/author/hyun_song_shin.htm

Pablo Zbinden

Mercado Libre

Argentina

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