Big Tech firms may benefit consumers in the financial services industry but, in the longer term, could bring competition risks, according to the United Kingdom's Financial Conduct Authority (FCA). The regulatory watchdog launched a discussion on Tuesday on Big Tech companies' competition impact on the financial industry.
According to the press release, the FCA is looking for responses by 15 January 2023. To start the discussion, it has published a report examining the potential competitive impacts of Big Tech firms in the UK in payments , consumer credit, insurance and deposit-taking sectors.
"In recent years, Big Tech's entry into financial services, in the UK and elsewhere, has demonstrated their potential to disrupt established markets, drive innovation and reduce costs for consumers. Across the world, we've seen the capability of Big Tech to offer transformative new products in areas such as payments, deposits and consumer credit," Sheldon Mills, the Executive Director of Consumers and Competition at the FCA, said.
"The discussion we are starting today will inform the FCA's pro-competitive approach to digital markets, and I encourage consumers, firms, and fellow regulators to join the conversation."
The United Kingdom's financial market watchdog believes that Big Tech companies can bring innovative offers, competitive pricing, healthy competition and increased efficiency to the local market. However, in the long term, the FCA identifies the potential risk of gaining too much market share too fast and exploiting market powers.
For now, any regulatory changes are not being proposed, and the goal of the current discussion paper is to stimulate a debate within the digital markets industry in the UK.
FCA Proactive Approach in 2021-2022
In the previous and the current year, the UK's financial markets regulator remains very active in many fields of its business. According to the fourth Consumer Investments Data Review published last week, the FCA opened 432 regulatory cases regarding potential cryptocurrency fraud and unaudited businesses between April 1, 2021, to April 31, 2022.
"More cases being referred to our crypto asset supervision team about potentially unregistered crypto asset businesses and potential scams, including through our improved detection of online promotions," the FCA wrote in the newest report.
The same report presented a case study regarding the retail contracts for difference (CFDs) market, focusing on the companies that were operating under the UK's temporary permissions regime granted in 2021. The FCA found that 16 of them carried the hallmark of a potential scam and encouraged clients to 'trade excessively'. Ultimately, their operations were stopped.
The current proactive approach to enforcement activities is a part of the recently updated Consumer Investments Strategy. The strategy aims to help consumers make proper trading decisions and limit the number of overall trading scams.
