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Big techs in finance: on the new nexus between data privacy and competition

Author

Listed:
  • Frederic Boissay
  • Torsten Ehlers
  • Leonardo Gambacorta
  • Hyun Song Shin

Abstract

The business model of big techs rests on enabling direct interactions among a large number of users on digital platforms, such as in e-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 effects, 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 payments, money management, insurance and lending. The entry of big techs into finance promises efficiency gains and greater financial inclusion. At the same time, it introduces new risks associated with market power and data privacy. 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," BIS Working Papers 970, Bank for International Settlements.
    • Handle: RePEc:bis:biswps:970
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    References listed on IDEAS

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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. 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).
    3. 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).

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    More about this item

    Keywords

    digital platforms; big techs; finance; data privacy; competition;
    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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