How Should Regulation Adapt As Big Tech Increasingly Enters Banking?

Jul 23, 2020

NY, NY and LONDON  23 July, 2020 – According to a new report by the International Banking Federation (IBFed) and global management consulting firm Oliver Wyman, policymakers and regulators worldwide will be best served by pro-actively deliberating on the next evolution of the financial services market.  Where possible, they should help shape an orderly modernization and digitization of the financial sector to address the novel opportunities and risks associated with big techs’ increasing role in financial services.

The joint report, titled Big Banks, Bigger Techs? How Policy-makers Could Respond to a Probable Discontinuity, shows how authorities worldwide face the difficult challenge of ensuring that regulation and supervision protects consumers and systemic stability while capturing the benefits of innovation and competition.  IBFed and Oliver Wyman asked a broad range of industry participants and policymakers across most major markets about their current views and what they viewed as challenges for the future.  The markets included the UK, the EU, the US, Australia, Brazil, Canada, China, India, Japan, South Korea and South Africa.

“In a few major markets, big techs’ unique scale and ecosystem model hold the potential to fundamentally change competitive dynamics,” said Lisa Quest, Co-author of the report and the Head of Oliver Wyman’s Public Sector & Policy practice for the UK and Ireland. “At the same time, there is also the potential for financial risks to arise outside the current regulatory perimeter.”

Hannah Gurga, Managing Director, Digital Technology & Cyber, UK Finance, said: “Technology is transforming many aspects of our lives, including the way we choose to bank and manage our finances. Across the banking and finance sector, firms are investing in new technologies and partnering with fintech operators to develop products and services that better meet the needs of their customers. The entry of big tech into financial services creates new opportunities, but it also brings new risks. As we embark on this next market evolution, consideration is now needed as to how best to maintain the stability, resilience, and consumer protections that are so integral to the banking system.”

For the regulation of the financial services market’s next evolution, the report makes three distinct sets of recommendations: revising measures within financial regulation, strengthening the policy response on themes that cut across industries, and extending finance-specific regulations to other industries where inconsistencies in regulation and enforcement have emerged.

Rob Nichols, President and CEO of the American Bankers Association and the current IBFed Chairman, said: “Technology is rapidly changing the way customers connect with their banks. Banks are investing in innovation and partnering with technology companies of all sizes to deliver the latest digital tools to their customers. Increasingly, large diversified technology companies are offering financial services directly to consumers. As this report spells out, these new business models raise questions about the appropriate role of big tech in banking and whether the current regulatory structure can ensure that customers receive the protections they have come to expect from banks.”

To find out more about the joint report, please look here.

About International Banking Federation (IBFED) ( www.ibfed.org )

The International Banking Federation (IBFed) was formed in 2004 to represent the combined views of our national banking associations. The IBFed collectively represents more than 18,000 banks, including more than two thirds of the largest 1000 banks in the world. IBFed member banks play a crucial role in supporting and promoting economic growth by managing worldwide assets of over 75 trillion Euros, by extending consumer and business credit of over 40 trillion Euros across the globe, and by collectively employing over 6 million people. The IBFed represents every major financial centre and members’ activities take place globally. This worldwide reach enables the IBFed to function as a key international forum for considering regulatory and other issues of interest to the global banking industry.

About UK Finance

UK Finance is the collective voice for the banking and finance industry. Representing more than 250 firms across the industry, we act to enhance competitiveness, support customers and facilitate innovation.  For more information please call the UK Finance press office on 020 7416 6750 or email press@ukfinance.org.uk

About Oliver Wyman

Oliver Wyman is a global leader in management consulting. With offices in 60 cities across 29 countries, Oliver Wyman combines deep industry knowledge with specialized expertise in strategy, operations, risk management, and organization transformation. The firm has more than 5,000 professionals around the world who work with clients to optimize their business, improve their operations and risk profile, and accelerate their organizational performance to seize the most attractive opportunities. Oliver Wyman is a business of Marsh & McLennan Companies [NYSE: MMC]. For more information, visit www.oliverwyman.com. Follow Oliver Wyman on Twitter @oliverwyman