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Big Techs in Finance: On the New Nexus Between Data Privacy and Competition

In: The Palgrave Handbook of Technological Finance

Author

Listed:
  • Frederic Boissay

    (Bank for International Settlements)

  • Torsten Ehlers

    (Bank for International Settlements)

  • Leonardo Gambacorta

    (Bank for International Settlements)

  • Hyun Song Shin

    (Bank for International Settlements)

Abstract

The business model of big techs rests on enabling direct interactions among a large number of users on digital platformsdigitalplatforms, such as in e-commercee-commerce, search and social media. An essential by-product is their large stock of user data, which they use to offer a wide range of services and exploit natural network effectsnetworkeffects, generating further user activity. Increased user activity completes the circle, as it generates yet more data. Building on the self-reinforcing nature of the data-network-activities loop, some big techs have ventured into financial services, including paymentspayments, money managementmoney management, insuranceinsurance and lendinglending. The entry of big techs into finance promises efficiency gains and greater financial inclusionfinancialinclusion. At the same time, it introduces new risks associated with market powermarket power and data privacyprivacy. The nature of the new trade-off between efficiency and privacy will depend on societal preferences, and will vary across jurisdictions. This increases the need to coordinate policies both at the domestic and international level.

Suggested Citation

  • Frederic Boissay & Torsten Ehlers & Leonardo Gambacorta & Hyun Song Shin, 2021. "Big Techs in Finance: On the New Nexus Between Data Privacy and Competition," Springer Books, in: Raghavendra Rau & Robert Wardrop & Luigi Zingales (ed.), The Palgrave Handbook of Technological Finance, pages 855-875, Springer.
    • Handle: RePEc:spr:sprchp:978-3-030-65117-6_31
    DOI: 10.1007/978-3-030-65117-6_31
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    References listed on IDEAS

    as
    1. Alessandro Acquisti & Curtis Taylor & Liad Wagman, 2016. "The Economics of Privacy," Journal of Economic Literature, American Economic Association, vol. 54(2), pages 442-492, June.
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    6. Gambacorta, Leonardo & Huang, Yiping & Qiu, Han & Wang, Jingyi, 2024. "How do machine learning and non-traditional data affect credit scoring? New evidence from a Chinese fintech firm," Journal of Financial Stability, Elsevier, vol. 73(C).
    7. Chen, S. & Doerr, S. & Frost, J. & Gambacorta, L. & Shin, H.S., 2023. "The fintech gender gap," Journal of Financial Intermediation, Elsevier, vol. 54(C).
    8. R. H. Coase, 2013. "The Problem of Social Cost," Journal of Law and Economics, University of Chicago Press, vol. 56(4), pages 837-877.
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    Cited by:

    1. Brei, Michael & Ferri, Giovanni & Gambacorta, Leonardo, 2023. "Financial structure and income inequality," Journal of International Money and Finance, Elsevier, vol. 131(C).
    2. Kraemer-Eis, Helmut & Botsari, Antonia & Gvetadze, Salome & Lang, Frank & Torfs, Wouter, 2021. "European Small Business Finance Outlook 2021," EIF Working Paper Series 2021/75, European Investment Fund (EIF).
    3. Cárdenas, Miguel & Madeira, Carlos & Morales-Resendiz, Raúl & Musa, Miguel & Sanclemente, Mario & Sanz-Bunster, Leon, 2024. "Tiered access in RTGS systems: A DLT-based approach," Latin American Journal of Central Banking (previously Monetaria), Elsevier, vol. 5(1).

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    More about this item

    Keywords

    Digital platforms – big techs – finance – data privacy - competition;

    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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