FSB全球金融稳定委员会-BigTech-firms-in-finance-in-emerging-market-and-developing-economies_38页_804kb

Summary of BigTech Firms in Finance in Emerging Market and Developing Economies

Core Content

This report examines the role and impact of BigTech firms in financial services in emerging market and developing economies (EMDEs), focusing on the rapid and broad expansion of these firms compared to advanced economies (AEs). It highlights the opportunities and challenges associated with their activities, particularly in the context of financial inclusion, technological innovation, and regulatory considerations.

Main Trends and Patterns

• Rapid Expansion: BigTech firms have expanded into financial services in EMDEs more rapidly and broadly than in AEs. This is driven by the underdeveloped nature of financial systems and lower levels of financial inclusion.
• Mobile Money Growth: In sub-Saharan Africa and Southeast Asia, mobile money services have significantly increased access to financial services. For instance, M-Pesa in Kenya saw 73% of the population owning a mobile money account by 2017.
• Credit Services: BigTech firms provide credit services that, while not large in absolute terms, are more extensive than those offered by traditional financial institutions in EMDEs. China is a major market for BigTech credit, with services like those from Alibaba/Ant Financial and Tencent/WeBank offering a wide range of financial products.
• Payment Services: In some jurisdictions, such as Saudi Arabia, BigTech firms offer a variety of financial services, including international remittances, leveraging digital platforms to serve large expatriate communities.
• Technology Utilization: The use of mobile phones and internet access has allowed BigTech firms to reach underserved populations. QR code-based payments have gained traction in China and other EMDEs, enabling seamless digital transactions without the need for physical payment terminals.

Drivers of BigTech Activity in EMDEs

Demand Side Drivers

• Financial Inclusion Gaps: Lower levels of financial inclusion in EMDEs create a significant demand for BigTech financial services, especially among low-income populations and in rural areas.
• High Remittance Flows: Many EMDEs rely heavily on remittances from abroad, which BigTech firms can facilitate through lower-cost digital solutions.
• Young Population: A large portion of EMDE populations are under 30, increasing the likelihood of adopting digital financial services due to familiarity with technology.
• Convenience and Customization: Financial services provided by BigTech firms are often more convenient and tailored to user needs, which is highly valued by consumers.

Supply Side Drivers

• Cost Efficiency: BigTech firms typically have lower marginal costs of serving customers in EMDEs compared to traditional financial institutions, allowing them to offer more affordable services.
• Complementing Core Businesses: Financial services help BigTech firms enhance their core technology businesses by providing additional value to users, such as loans for drivers or credit for merchants.
• Technological Innovation: The availability of mobile phones and internet access, along with advanced data analytics, enables BigTech firms to offer innovative financial services and make lending decisions based on non-traditional data sources.
• Regulatory Support: In some EMDEs, governments have created supportive regulatory environments, such as allowing e-money and facilitating open banking through APIs, which enable BigTech firms to expand their activities.

Benefits and Risks

Benefits

• Increased Efficiency: Technology improves the efficiency of financial services.
• Lower Costs and Better Accessibility: Digital solutions reduce the cost and increase the accessibility of financial services for previously unbanked populations.
• Enhanced Consumer Welfare: Tailored and convenient services improve consumer welfare and support financial stability.

Risks

• Consumer Protection Concerns: Lower financial literacy in EMDEs increases the risk of consumer harm, particularly with the use of personal data.
• Market Dominance: BigTech firms may dominate financial markets in some EMDEs, potentially reducing competition and increasing systemic risk.
• Operational Vulnerabilities: Weaker financial and communications infrastructure in EMDEs can expose BigTech firms to higher operational risks.
• Impact on Incumbent Institutions: Competition from BigTech firms may reduce the profitability and resilience of traditional financial institutions.

Policy Implications

• Regulatory Frameworks: The principle of "same risk - same regulation" should be applied to BigTech firms, while tailoring frameworks to reflect their scale and scope.
• Data Governance: Financial authorities should develop robust public policies and frameworks regarding data governance, consumer protection, and operational risk management.
• Infrastructure Development: Governments can support the growth of BigTech financial services by developing financial infrastructures and digital identity systems.
• Open Banking and Sandboxes: Open banking initiatives and regulatory sandboxes can foster innovation and competition in financial services.

Conclusion

The expansion of BigTech firms into financial services in EMDEs presents both opportunities and risks. While they contribute to financial inclusion and innovation, their activities require careful regulation to ensure consumer protection, financial stability, and fair competition. The report underscores the importance of a balanced regulatory approach that supports growth while mitigating potential systemic risks.