City regulator the Financial Conduct Authority is launching a consultation on the potential harms – and benefits – of Amazon, Apple, Google and Meta ramping up their financial services operations, amid concerns their domination of digital markets could hit competition.
Big tech firms’ presence in UK financial services markets has been steadily increasing; all four companies hold payment action permits, with Amazon and Apple also having some permissions regarding consumer credit and insurance.
While the watchdog acknowledges that big tech involvement in financial services would bring “increased efficiency” and “healthy competition” in the short term, it states that this could lead to longer term exploitation of ecosystems and data stores, to “lock consumers in”.
Mobile payment apps such as Apple Pay and Google Pay were used by 27% of consumers in 2020, double their use in 2017, according to the FCA.
Apple recently acquired credit reference agency Credit Kudos, with a view to launching a US-based ‘buy now, play later’ service called Apple Pay Later, while last week Amazon said it plans to enter the UK insurance space with its Amazon Insurance Store.
FCA executive director of consumers and competition Sheldon Mills said: “In recent years, big tech’s entry into financial services, in the UK and elsewhere, has demonstrated their potential to disrupt established markets, drive innovation and reduce costs for consumers. Across the world, we’ve seen the capability of big tech to offer transformative new products in areas such as payments, deposits and consumer credit.
“We want to make sure that these benefits are fully realised while, at the same time, ensuring good consumer and market outcomes. This is vital when we consider the role of big tech firms in the provision of key technological infrastructure like cloud services.
“The discussion we are starting today will inform the FCA’s pro-competitive approach to digital markets, and I encourage consumers, firms and fellow regulators to join the conversation.”
To begin the discussion, the FCA has published analysis focusing on the potential competition impacts of big tech’s entry in four vital retail sectors: payments, deposit taking, consumer credit and insurance.
By combining financial services with their existing business, firms can bring benefits to consumers but the FCA believes that, in the longer term, tech firms could pose competition risks if they rapidly gain market share, and they are able to exploit market power.
No regulatory changes are being proposed at this stage, and the FCA’s paper aims to stimulate discussion to inform its regulatory approach to big tech firms as part of the new UK pro-competitive regime for digital markets.
The deadline for responses to the FCA has been set for January 15 2023.
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