The Reserve Bank of India has pointed out several key issues in big techs gaining prominence in the financial services sector. It specifically points out toe concerns relating to level playing field with banks and operational risks, which the central bank says have intensified in the recent times. RBI’s Financial Stability Report for July raises these concerns and also notes that big tech offers a wide range of digital financial services and has a substantial footprint in the payment systems, crowdfunding, asset management, banking and insurance of several advanced and emerging market economies. While this holds the promise of supporting financial inclusion and generating lasting efficiency gains, including by encouraging the competitiveness of banks, some important policy issues arise like a level playing field with banks, operational risk, too-big-to-fail issues, challenges for antitrust rules, cyber security and data privacy, the report says. The report highlights 3 unique challenges – they straddle many different (non-financial) lines of business, with sometimes opaque overarching governance structures; they have the potential to become dominant players in financial services; and they are generally able to overcome limits to scale in financial services provision by exploiting network effects.
