A University of Queensland academic has contributed to a new report by the International Banking Federation (IBFed) and global management consulting firm Oliver Wyman, showing that 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 modernisation and digitisation 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.
School of Economics Adjunct Professor and Chairman of UK Finance Bob Wigley said big tech had changed how many of us lived our lives.
“In banking, the advance of technology is altering the sector’s landscape, helping firms to reshape their customer offering and drive efficiency,” he said.
“While major fintech operators have emerged, so far, in the West at least, big tech has yet to expand its dominance into financial systems on a considerable scale. But it’s only a matter of time before they do.”
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.
Co-author of the report and the Head of Oliver Wyman’s Public Sector & Policy practice for the UK and Ireland Lisa Quest said In a few major markets, big techs’ unique scale and ecosystem model held the potential to fundamentally change competitive dynamics.
“At the same time, there is also the potential for financial risks to arise outside the current regulatory perimeter,” she said.
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.
President and CEO of the American Bankers Association and the current IBFed Chairman Rob Nichols 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,” he said.
“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.”
Contact: BEL Communications, media@bel.uq.edu.au
