Reserve Bank Report of Big Tech
Source: ET
GS II: Policies and Developmental Studies
What is discussed under the Reserve Bank Report of Big Tech?
- About Big Techs
- The Big Tech Risks
- Regulators Cautious
Why in News?
The Reserve Bank has once again raised concerns about the impact of big tech’s supremacy in financial services saying it can undermine financial stability.
About Big Techs
- Big Tech refers to the most powerful and largest technological corporations in their respective industries.
- Their products and services are utilised internationally and are extensively depended on by enterprises and consumers alike.
Photo by Rami Al-zayat on Unsplash - Several massive companies are commonly referred to as Big Tech.
- They are frequently combined and referred to using acronyms.
- Amazon, Apple, Facebook, Google, and Microsoft are among the technology behemoths.
- Each of the major technology corporations dominates its relevant field.
- Big tech firms keep their market capitalization, operate across several sectors, and influence people across platforms.
- Each of the major technology corporations serves as a hub for other internet services and activities.
The Big Tech Risks
- The central bank report, which listed the dangers presented by big techs, or huge non-financial technology enterprises, stated that the complicated governance structure of big techs restricts the opportunity for effective monitoring and the formulation of entity-based rules.
- Because of their direct exposure to the supply of financial services, big techs can have an influence on the risk and maturity transformation functions.
- This can sometimes translate into or contribute to shadow banking operations, endangering financial stability.
- Because of their widespread acceptance as third-party service providers, big techs frequently serve as the underlying foundation for a variety of services.
- This puts big techs in a unique position to readily obtain cross-functional databases that can be used to generate novel product offers.
- Big techs usually have the financial power to withstand competition challenges.
Regulators Cautious
- Regulators throughout the world are concerned about the influence of big tech on competition and market contestability, consumer data privacy rights, and financial intermediation and stability.
- As a result, regulators are realigning their frameworks to provide a fair playing field in the fintech area while mitigating the risks associated with the growth of big techs.
- With the rising complexity of the interconnections between financial institutions and technology businesses, regulatory frameworks must keep up with innovation in order to minimise the vulnerabilities that may result from the new risk propagation channels.
Going forward
- Laws in emerging markets and developing economies (EMDEs) must take into account the new interconnections that big techs may form with current financial institutions.
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