Big Techs and Global Financial Regulation: Intersection, Challenges, and Solutions

Abstract

Big Techs are globally active digital platforms or technology firms, typically consisting of more than 100 million members or users. The emergence of Big Tech in finance has the potential to offer great benefits to consumers, but also to intensify existing challenges and introduce new challenges to the financial ecosystem. In this paper, we identify four interrelated risks associated with the widespread entry of Big Tech into the financial ecosystem: operational risks; complexities associated with the changing nature of finance; the exacerbation of negative externality challenges; and the potential for systemic financial instability.

We highlight a shift in post-Crisis financial regulatory thinking and argue that the regulation and supervision of Big Techs will require effective coordination beyond the traditional financial regulatory perimeter to effectively integrate aspects such as data protection and competition, among others that are exacerbated by Big Tech. Accordingly, we propose a novel coordinated mechanism, together with a sensible use of SupTech, to inform the regulation and supervision of Big Techs. This will enable regulators to implement a tiered licensing regime and carry out effective enforcement actions. We also emphasize the need to redouble efforts at the global level to address the cross-border implications of financial service and product offerings provided through Big Techs.

Keywords: Big Tech, SupTech, Regulatory Coordination, Competition, Consumer Protection, Data Protection