The ability to harness “big data” and accelerate digitalisation and automation will be a key determinant of long-term winners and losers in the financial institutions sector, says Fitch Ratings.
The direction and prioritisation of regulation forcing data sharing and “same activity, same regulation” will be key to determining how the rapid digitalisation of finance and competition from Big Tech will affect bank and non-bank sectors, says the global credit rating agency.
FinTechs and incumbent banks could benefit should global regulators and competition authorities force large technology companies (Big Tech) to share data to address competition concerns.
New regulations could support continued innovation for the financial sectors by allowing sourced data to be used across silos, and enhancing credit data bureaus with insights gained through machine-learning technology.
Beyond the payments sphere, Fitch believes that FinTech’s and Big Tech’s respective footprints may become economically more significant within emerging market (EM) regions such as parts of Latin America, Africa and Asia, where centralised credit-scoring bureau data tends to be less robust, regulations are less stringent and large under-banked populations reside.
In emerging markets, Big Tech platforms also provide access to money market funds and basic insurance products.
The accelerated use of online platforms in light of the pandemic has led to increased data and insights that will shape the playing field for financial institutions. But the growing size of the digital economy means anti-competition concerns are becoming an increasing focus for regulators. The increased activity of Big Techs in finance, particularly in payments processing, is driving authorities toward a more comprehensive regulatory approach that includes competition and data-privacy objectives.
Regulatory concerns centre on Big Tech’s perceived ability to scale up and establish a dominant position quickly.
However, questions remain regarding the approaches authorities can and will take in respect to data portability, and access. Namely, how much data can and should be shared, which jurisdiction data resides within if data security can be ensured, and to what extent Big Tech data repositories can truly be measured.