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BigTech and the changing structure of financial intermediation

Author

Listed:
  • Jon Frost
  • Leonardo Gambacorta
  • Yi Huang
  • Hyun Song Shin
  • Pablo Zbinden

Abstract

SUMMARYPablo Zbinden?>We consider the drivers and implications of the growth of ‘BigTech’ in finance – i.e. the financial services offerings of technology companies with established presence in the market for digital services. BigTech firms often start with payments. Thereafter, some expand into the provision of credit, insurance and money management products, either directly or in cooperation with financial institution partners. Focusing on credit, we show that BigTech firms lend more in countries with less competitive banking sectors and less stringent bank regulation. Analysing the case of Argentina, we find support for the hypothesis that BigTech lenders, by acquiring a vast amount of non-traditional information, have an advantage in credit assessment relative to a traditional credit bureau. They also serve unbanked borrowers, and may have an advantage in contract enforcement. It is too early to judge the extent of BigTech’s eventual advance into the provision of financial services. However, the early evidence allows us to pose pertinent questions that bear on their impact on financial stability and overall economic welfare.

Suggested Citation

  • Jon Frost & Leonardo Gambacorta & Yi Huang & Hyun Song Shin & Pablo Zbinden, 2019. "BigTech and the changing structure of financial intermediation," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 34(100), pages 761-799.
    • Handle: RePEc:oup:ecpoli:v:34:y:2019:i:100:p:761-799.
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    File URL: http://hdl.handle.net/10.1093/epolic/eiaa003
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    References listed on IDEAS

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    More about this item

    Keywords

    E51; G23; O31;
    All these keywords.

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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