Big tech in finance: 'Big tech a priority' says FCA

In a speech delivered on 22 April 2024 to the Digital Regulation Cooperation Forum (DRCF), the FCA’s Chief Executive, Nikhil Rathi, announced the FCA’s plans to further examine how Big Tech firms’ unique access to large sets of data could unlock better products, more competitive prices and wider choice for consumers and businesses.

The potential involvement of Big Tech in data sharing initiatives would be a pivotal step in the move towards Open Finance and other ‘smart data’ schemes, including the expansion of Open Banking-style access to payment account data to other institutions and data sets. 

As highlighted by the FCA, currently Big Tech firms can access financial services data through Open Banking but are not required to share their data with the financial industry.

Further context on the DRCF and the FCA’s plans

The DRCF brings together four UK regulators (including the FCA, the CMA, Ofcom and the UK ICO) to deliver a coherent approach to digital regulation for the benefit of people and businesses online. The DRCF recognises the potential for regulators to play a key role in helping coordinate potential future ‘smart data’ schemes and more generally encouraging data portability between sectors, particularly should the Government implement schemes (via secondary legislation) under new powers proposed in the Data Protection and Digital Information (DPDI) (No.2) Bill to facilitate private sector data sharing.

The FCA’s Big Tech plans are consistent with the recommendations made in November last year by HM Treasury (HMT) in their report: the Future of Payments Review 2023 (the HMT Report). The HMT Report considers how payments are likely to be made in the future and flagged that Big Tech in particular is redefining not just payments, but financial services more generally.

The FCA’s planned examination into the activities of Big Tech were also included in a Feedback Statement (FS24/1) published on the same day in response to its Call of Input on data sharing between Big Tech and financial services firms. The Call for Input, published in November 2023, asked for information on any asymmetry of data and data sharing mechanisms between Big Tech firms and other firms operating in financial services, and whether this could influence how effectively competition evolves in financial services markets. 

As set out in the Feedback Statement, the FCA has found that:

1. limits on the availability of, and access to, Big Tech firms’ data have prevented significant exploration of the value of the data in a financial services context.
2. there are likely to be potential use cases for Big Tech data in areas like consumer credit and insurance where risk-based pricing can be informed by consumer behaviour. There are also likely to be use cases in the personalised marketing of financial services.
3. digital wallets have already started to access open banking data as a means of providing account information and payment history, and have the potential to become a primary interface through which customers undertake their banking. As digital wallets evolve, by adding on financial offerings that go beyond facilitating payments – such as loans, insurance, investing, and digital banking, the gatekeeper risk could extend to a range of downstream financial retail financial markets adversely impacting competition. 

In light of these conclusions, the FCA plans to continue monitoring Big Tech firms’ activities in financial services (within and outside the regulatory perimeter) to assess whether policy changes are needed to mitigate competition harms and continue the FCA’s on-going internal supervisory work and external work with other regulators, e.g. the Digital Markets Unit (DMU), DRCF and international regulators. The FCA also proposes to explore use cases for Big Tech data in financial services through the FCA's Digital Sandbox.

Interestingly Big Tech’s increasing involvement in the payment journey was also of particular interest in the HMT Report on the future of payments. As discussed in our article here, with digital wallets gaining such a significant share of payments volume globally, the HMT Report recommended that Government and regulators attempt to maintain an open and constructive dialogue with the digital wallet providers (and other international tech players) as the pace of innovation is rapid, and there are significant opportunities to collaborate in the interests of UK consumers.

As set out in the Feedback Statement, the FCA plans to work closely with the Payments Systems Regulator (PSR) on understanding the risks and opportunities associated with digital wallets.

Conclusion 

The UK Government has been taking stock of the payments environment in the UK, looking at both the user experience and the overall payments regulatory landscape.

It will be interesting to see how this develops and if further regulation is looming for Big Tech and digital wallet providers as their relationship with end-users evolves. It could be that Open Banking-style regulation is coming down the track for Big Tech. But, for now at least, any potential secondary legislation or smart data scheme under the DPDI Bill seems some way off.