The increasingly prominent role of large technology firms (big techs) in the financial sector has raised questions about their inner workings and regulation.
Big tech business models are characterised by strong internal and
external interdependencies. Intragroup dependencies arise from the
common use by big tech entities of a general payment infrastructure,
technological platforms and applications; and from sharing data and
insights derived from those data across the services they provide.
External interconnections arise from partnerships of big tech entities
with financial institutions to provide financial services. The financial
services industry and regional big techs have come to heavily rely on
technological services provided by global big techs, such as data
analytics and cloud computing.
Big tech interdependencies come with specific risks, in particular to
operational resilience, and may require the development of specific
entity-based rules for big tech operations in the financial sector. In
the meantime, authorities are searching for interim solutions to counter
potential financial stability risks.
This paper assesses the interdependencies inherent in big tech
business models based on publicly available information on Alibaba,
Amazon, Grab, Jumia, Mercado Libre and Rakuten. It outlines the
regulatory implications of how big techs provide financial services and
the tools financial authorities have at their disposal now to address
related risks.
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