Big tech’s share of some finance segments will surge

Tuesday, July 2, 2019

The network-to-activity loop lets ‘big tech’ firms gain market share quickly, but the loop may be vicious not virtuous

Impacts

  • Inclusion is key to all the 2030 Sustainable Development Goals; fintech can cut entry costs by providing an identity and payments network.
  • Half of China’s previously surging money-market-funds invest short-term; rapid withdrawals would systemically threaten the banking sector.
  • China’s regulation drive and slowdown enabled India to overtake it for fintech funding in January-March.
  • The crime, custody, principal-agent and systemic risks are common to all finance, but some areas, notably data protection, need new rules.
  • Each nation needs a competition body, a finance regulator and data protection rules; cooperation across these is key, and between nations.

Conclusion

Big tech firms make more profit than traditional banks, giving them cash for innovation. Cash combined with a frontier IT system and access to loyal customers’ data gives big tech an advantage in payments and lending.

Big tech payment systems are bank-dependent as they overlay existing infrastructure or are proprietary systems but require users to have a bank account. Indeed, much of the progress has come from being a distribution channel for third-party providers of insurance or asset management.

In sectors including corporate finance where a longer history, personal interaction and expertise in risk and regulation are important, progress may come through collaborating with traditional firms.

References

See INTERNATIONAL: AI transforms finance but raises risks - April 9, 2018

© Oxford Analytica 2021. All rights reserved. This content contains general information about geopolitical, macroeconomic and social developments or (where stated) other matters. It does not contain advice or recommendations that may be relied on. Where links to external websites are provided, this does not indicate that Oxford Analytica or Emerald Group agree with, endorse or have checked for accuracy the contents of said sites.

Expert Briefings powered by Oxford Analytica
Stay up to date
Sign up to the Expert Daily Briefings email alert and receive up-to-the-minute analysis of global events as they happen.
*If your university does not have access to Expert Briefings, visit our information page to find out more.