The FCA has published its analysis of feedback received from its Call for Input (CFI) in November 2023 regarding potential competition impacts form data asymmetries between Big Tech and financial services firms. Nikhil Rathi also spoke on how the FCA is making Big Tech a priority, and how it needs to examine how the unique data access that Big Tech firms have could be good for consumers and business, following its investigations into the possible dangers caused by information asymmetry.
The CFI formed part of the FCA’s commitment in its three-year strategy to analyse the competition impact of the increasing prevalence of Big Tech in financial services. Specifically, concerns have been raised about the imbalances in data and data sharing mechanisms between Big Tech firms and other firms in financial services.
31 responses were received from a variety of stakeholders. Key findings include:
- No significant current impacts have been identified from the data asymmetry.
- The CFI identified three key issues which could have a negative impact on competition in retail financial markets in the future:
- Risk of data asymmetry increasing barriers to entry and expansion
- For example, Big Tech firms hold data that could support credit information, allowing them to better assess pricing and affordability of financial services products.
- Risk of Big Tech platforms becoming the central gatekeepers for retail financial services
- Big Tech search services are crucial for the distribution of financial services, and there is the potential for Big Tech firms to use its digital payments, wallets and authentication services to become a gatekeeper to cardholders.
- Risk of financial services firms becoming reliant on partnerships with Big Tech and limiting their bargaining power
- Concentration of third-party services amongst a small number of Big Tech firms could limit the power held by financial services firms, potentially increasing prices downstream and reducing innovation.
- Risk of data asymmetry increasing barriers to entry and expansion
The FCA has proposed four next steps:
- Continue monitoring the activities of Big Tech in the sector
- Empirically test whether the data of Big Tech firms from core digital activities will enhance their activities in retail financial markets, developing regulatory proposals if necessary
- Examine how incentives can be aligned to promote data sharing to achieve better consumer outcomes
- The FCA and PSR will work throughout on understanding the impacts of digital wallets on competition.
Mr Rathi said that if the FCA’s analysis finds that Big Tech data is valuable in financial services, it will look to incentivise data sharing between Big Tech and regulated firms through Open Banking and Open Finance.