Tech firms have obtained banking licences in several jurisdictions to access low-cost deposits and to gain the credibility a banking licence affords.
Following the 2007–09 financial crisis, big techs and fintechs
started to offer financial services without the need for or interest in a
banking license. More recently, tech firms have obtained banking
licences in several jurisdictions to access low-cost deposits and to
gain the credibility a banking licence affords. These developments have
been facilitated by a conducive regulatory environment, where some
authorities have set aside historical concerns regarding the ownership
of banks by non-financial companies (NFCs) and allowed new classes of
NFCs – such as tech firms – to own banks, in the hope of improving
consumer outcomes.
This paper assesses the merits of extending a banking licence to tech
firms and explores their regulatory landscape in seven jurisdictions.
To ascertain their risk characteristics, we categorise the universe of
tech firms that provide financial services into three groups: standalone
fintechs, large diversified fintechs and big techs. Big techs and large
diversified fintechs pose the most significant supervisory concerns,
with the former requiring more onerous prudential measures than the
latter. To mitigate their perceived risks, authorities impose various
quantitative and qualitative requirements during authorisation, but
supervision and enforcement may pose formidable challenges. In this
context, we outline a range of policy options that are mapped to the
risk profile of tech firms seeking a banking licence, to help support
the gatekeeping role of prudential authorities.
BIS
© BIS - Bank for International Settlements
Key
Hover over the blue highlighted
text to view the acronym meaning
Hover
over these icons for more information
Comments:
No Comments for this Article