FCA has issued a letter welcoming the Competition Division’s call for input on the potential competition impacts from data asymmetry between Big Tech and firms in financial services. In particular, FCA notes that data asymmetry has a significant impact on competition in financial services and that there is a need to seek to address both present and future disparities.
FCA highlights the sheer amount of data that companies such as Amazon are able to gather and the valuable insights these give them. It also suggests that such organisations have an unfair advantage over financial services firms as:
- they are able to access Open Banking and credit reference agency data without being required to reciprocate;
- face no barriers to launching products in competition with traditional financial services providers only available on their own proprietary devices;
- they have not had to contribute to the cost of the creation of these data sources but can access them cost free;
- they are not subject to the same consumer protection and other regulatory requirements as financial services firms; and
- although many online scams take place on their platforms, they are not presently required to contribute to the reimbursement schemes to which banks are subject.
The letter suggests a number of ways in which FCA might seek to mitigate the risks posed, including:
- Perimeter – e.g., changing the scope of what is regulated as “financial services” rather than addressing the data asymmetry directly?
- Data portability – e.g., ensuring that principles underlying open banking (i.e., consumers are in control of their own information) are extended to ensure appropriately reciprocal arrangements between Big Tech and financial services?
- Partnerships – e.g., requiring Big Tech to demonstrate appropriate data access through arm’s length commercial arrangements (with oversight to ensure those are fair)?
- ‘Fair use’ restrictions – e.g., limiting how and for what purposes certain types of data can be used by Big Tech to enhance customer experiences, products and services?
- New business models – e.g., enabling a different form of “Credit Reference Agency” (which were created to solve precisely this issue between financial services players by enabling a competitive market to provide services to both consumers and financial services market participants through prescribed obligations on processors of that data)?