BigTech in Finance Market Developments and potential financial stability implications

BigTech firms1 – large companies with established technology platforms – are playing an increasingly prominent role in the financial system and have begun to provide financial services. Some BigTech firms have grown rapidly in the past decade and, on some measures, are comparable in size or even bigger than some of the world’s largest financial institutions. BigTech firms benefit from having large existing customer bases and from collecting and analysing their customers’ data. They can use this to achieve scale rapidly across different business lines, including in financial services. They also tend to have significant financial resources and are often able to access capital and funding at lower cost than some large financial groups

BigTech firms differ in both the breadth of financial services they offer and in the nature of their interaction with incumbent financial institutions. In advanced economies (AEs), BigTech firms’ financial activities are generally more narrow (e.g. focussed on payments), and tend to complement the activities of existing financial institutions. In emerging markets and developing economies (EMDEs), BigTech firms provide a broader range of financial services such as lending, insurance and asset management. This variation may be due to differences in financial development, approaches to financial regulation, and the penetration of financial services across different geographies.