UK raises questions over Big Tech’s encroachment into financial services

UK regulatory body the Financial Conduct Authority has published some thoughts on the potential competition impacts of Big Tech’s entry into the finance sector, and is seeking views on the matter.

While there is no formal rule changes or regulation being mentioned as yet, the FCA has published some analysis looking at the potential impact of Big Tech’s entry into payments, deposit taking, consumer credit and insurance from a competition standpoint. It has done this in order to kick off a ‘discussion’ on the subject.

The FCA lays out its concerns in a friendly enough tone, pointing out that by combining financial services with their existing business, Big Tech firms may well bring benefits to consumers such as fancy new offers or highly competitive pricing which it can deliver through increased efficiency.

Which is all part of the game, it concedes, but in the longer term it suggests they may pose competition risks if they rapidly gain market share and are then able to exploit market power – postulations it has no doubt put together upon observing how other industries have survived collision with Big Tech.

“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, Executive 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. This is vital when we consider the role of Big Tech firms 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.”

At this stage FCA wishes to ‘stimulate discussion to inform its regulatory approach to Big Tech firms’ with its paper. Many who have paid attention as the tentacles of Amazon and Google et al spread into practically every industry on the planet will be justified in a latent concern of what might happen when these massive conglomerates turns up at their door and starts innovating and disrupting the current state of affairs out of existence. So the FCA seems well within its rights to start raising questions at the very least.

Elsewhere, the FCA is also having a crackdown on ‘greenwashing‘ – or when firms make exaggerated, misleading or unsubstantiated claims about their green credentials. The regulator is proposing a package of new measures such as restrictions on how terms like ‘ESG’, ‘green’ or ‘sustainable’ can be used.

Sacha Sadan, the FCA’s Director of Environment Social and Governance, said: “Greenwashing misleads consumers and erodes trust in all ESG products. Consumers must be confident when products claim to be sustainable that they actually are. Our proposed rules will help consumers and firms build trust in this sector. This supports investment in solutions to some of the world’s biggest ESG challenges. This places the UK at the forefront of sustainable investment internationally. We are raising the bar by setting robust regulatory standards to protect consumers in line with our wider FCA strategy.”

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