Big Techs in Finance: On the New Nexus Between Data Privacy and Competition

The Palgrave Handbook of Technological Finance, https://doi.org/10.1007/978-3-030-65117-6.

Posted: 25 Oct 2021

See all articles by Frédéric Boissay

Frédéric Boissay

Bank for International Settlements (BIS)

Torsten Ehlers

International Monetary Fund (IMF) - Monetary and Capital Markets Department; Bank for International Settlements (BIS)

Leonardo Gambacorta

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

Hyun Song Shin

Bank for International Settlements (BIS)

Date Written: October 8, 2021

Abstract

The business model of big techs rests on enabling direct interactions among a large number of users on digital platforms, such as in e-commerce, search and social media. An essential by-product is their large stock of user data, which they use to offer a wide range of services and exploit natural network effects, generating further user activity. Increased user activity completes the circle, as it generates yet more data. Building on the self-reinforcing nature of the data-network-activities loop, some big techs have ventured into financial services, including payments, money management, insurance and lending. The entry of big techs into finance promises efficiency gains and greater financial inclusion. At the same time, it introduces new risks associated with market power and data privacy. The nature of the new trade-off between efficiency and privacy will depend on societal preferences, and will vary across jurisdictions. This increases the need to coordinate policies both at the domestic and international level.

Keywords: digital platforms, big techs, finance, data privacy, competition

JEL Classification: E51, G23, O31

Suggested Citation

Boissay, Frédéric and Ehlers, Torsten and Gambacorta, Leonardo and Shin, Hyun Song, Big Techs in Finance: On the New Nexus Between Data Privacy and Competition (October 8, 2021). The Palgrave Handbook of Technological Finance, https://doi.org/10.1007/978-3-030-65117-6., Available at SSRN: https://ssrn.com/abstract=3945777

Frédéric Boissay

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

Torsten Ehlers

International Monetary Fund (IMF) - Monetary and Capital Markets Department ( email )

United States

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

Leonardo Gambacorta (Contact Author)

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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

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