investing with a smart phone / vgajic

With big tech firms such as Apple, Amazon, and Google gaining ground in the financial sector, the U.K.’s Financial Conduct Authority (FCA) is consulting on the competitive impact of their forays into financial services.

In a discussion paper, the regulator focused its analysis on four basic retail financial sectors — payments, deposit taking, consumer credit and insurance — where big tech firms could benefit consumers through increased competition with traditional financial firms, lower prices and improved efficiency and service.

The paper also cautioned that rapid gains in market share for big tech companies could enable them to exploit their market power to the detriment of their competition — and ultimately consumers.

“Based on evidence from big tech firms’ core markets and their expanding ecosystems, competition risks could arise in the future from them rapidly gaining market share, markets ‘tipping’ in their favour, and potential exploitation of market power that would be harmful to competition and consumer outcomes,” the paper said.

The FCA is not yet proposing regulatory changes to address the rise of big tech. Instead, the paper aims to stimulate a policy debate and inform its approach to these companies as part of the U.K.’s new “pro-competitive regime for digital markets.”

“In recent years, big tech’s entry into financial services in the U.K. and elsewhere has demonstrated [the sector’s] potential to disrupt established markets, drive innovation and reduce costs for consumers,” said Sheldon Mills, executive director of consumers and competition with the FCA, in a release.

“We want to make sure that these benefits are fully realized while, at the same time, ensuring good consumer and market outcomes,” he added. “This is vital when we consider the role of big tech firms in the provision of key technological infrastructure like cloud services.”

The deadline for responses to the discussion paper is Jan. 15, 2023. The FCA will also hold consultations on the issue.