FinTech Should Face Banking’s Regulations, According To Finance Chiefs
European financial leaders believe technology players like Facebook and Google are moving in on their turf, abetted by the fact that they don’t face the same regulatory limitations their counterparts in traditional banking do.
The complaints come as European markets are introducing an “open banking” regulation which requires lenders to offer access to consumer accounts if consumers have authorized said access for third party providers. Tech firms, the leaders complain, can cherry pick the most lucrative parts of financial services organizations — without facing the necessary but challenging areas that are heavily regulated.
Francisco González, executive chairman of Spanish bank BBVA, has warned that groups such as Facebook and Amazon in the U.S. and Alibaba and Tencent in China have the potential to “replace many banks.”
He further noted, “authorities [need] to bring order to this massive change” that could “pose risks to financial stability.”
“If I need capital to lend then let’s have the same rules for everyone — for the internet giants too.”
Tech is pushing into finance in a host of ways — Amazon provides payments and loans to its platform merchants, Facebook has an electronic money license in Ireland, Alibaba and Tencent have become dominant operators in China’s $5.5tn payments industry. And, notes Ralph Hamers, chief executive of Dutch bank ING, “open banking” has only opened the door more widely for tech firms.
“That is a threat to banks — because they have much more money to burn,” he told the Financial Times. “If they get this data they will go full circle as they don’t currently have transactional data on what people buy,” he added. “As a society we should think about that concentration of power.”
Power that many have questioned the use of recently, as Bruce Carnegie-Brown, chairman of the Lloyds’ of London insurance market, told the Financial Times.
There is clearly a mood that says these groups have to take more responsibility for their content, services and data that they have on people,” Carnegie-Brown told the FT. “I think we have reached a tipping point, whether it is with Amazon or Facebook, cybersecurity or data protection. We should be looking at them at an international level.”
BBVA’s Gonzalez notes that banks are responsible for anything that happens within them — and that this is a reasonable standard to hold all firms to.
“That same level of responsibility has to be applied to the platforms that the internet giants are deploying, and for that we need a different legal architecture.”