FCA to probe entry of 'big tech' in financial markets

It said the presence of big tech in UK financial markets had been steadily increasing, with the potential to expand further and change markets quickly.

To kick off the discussion, the FCA published an analysis focusing on the potential competition impacts of big tech’s entry into four vital retail sectors, being payments, deposit taking, consumer credit and insurance.

By combining financial services with their existing business, the regulator said technology firms could bring benefits to consumers, including innovative new offers with highly competitive pricing driven by increased efficiency, as well as healthy competition with incumbent financial services providers.

But in the longer term, the FCA warned that big tech could pose competition risks if they rapidly gained market share, and were able to exploit market power.

No regulatory changes were being proposed as yet, with the FCA’s paper aiming to “stimulate discussion” to inform its regulatory approach as part of the new UK pro-competitive regime for digital markets.

“In recent years, big tech’s entry into financial services, in the UK and elsewhere, has demonstrated their potential to disrupt established markets, drive innovation and reduce costs for consumers,” said Sheldon Mills, the FCA’s director of consumers and competition.

“Across the world, we’ve seen the capability of big tech to offer transformative new products in areas such as payments, deposits and consumer credit.

“We want to make sure that these benefits are fully realised while, at the same time, ensuring good consumer and market outcomes.”

Mills said that was “vital” when considering the role of big tech in the provision of key technological infrastructure like cloud services.

“The discussion we are starting today will inform the FCA’s pro-competitive approach to digital markets, and I encourage consumers, firms and fellow regulators to join the conversation.”

Reporting by Josh White at Sharecast.com.