BigTechs’ foray into financials draws scrutiny

Big tech companies that are venturing into the financial world are primarily competing in the payments and insurance sectors, and haven’t yet ventured into securities, according to European regulators.

In a new report, the European Supervisory Authorities (ESAs) — including the European Banking Authority, the European Securities Markets Association and the European Insurance and Occupational Pensions Authority — set out the results of their latest review of the direct provision of financial services by so-called BigTech companies such as Google, Apple and Amazon.

Among other things, the regulators found that these tech companies have mainly entered into the payments, e-money and insurance sectors. In certain cases, they’ve also ventured into banking, but they do not yet appear to be involved with securities or capital markets.

While the financial system’s exposure to BigTech firms currently remains limited, the regulators also highlighted that “some risks relating to intra-group interconnectedness may warrant policy actions” if these exposures continue to grow.

The regulators noted the existing approach to overseeing the provision of financial services by BigTech firms is typically activity-focused, rather than at the entity level, “which means that risks posed by intra-group interdependencies could be insufficiently mitigated due to an absence of applicable consolidation or conglomerates regulation/supervision.”

The regulators also called for additional measures to strengthen cross-border and cross-disciplinary supervision of BigTechs that are active in the financial sector.

The ESAs said they will continue their efforts to facilitate information sharing between financial regulators and other authorities that are involved in overseeing BigTechs, such as data protection and consumer protection authorities.

“This will help to further identify and assess opportunities and risks, especially when arising from intra-group and external dependencies, and to identify potential mitigation measures,” they said.

Additionally, the ESAs said they may carry out targeted reviews to increase their insight into emerging trends among BigTechs, such as white labelling products and services.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.