BigTech firms are progressively entering the financial sector and becoming significant service providers, especially in rising markets.
BigTechs have entered financial service utilizing platform based-technology to make payments very easy and all the more recently ventured into different areas, like lending, asset management, and insurance services.
As per International Monetary Fund (IMF), they amass data from their nonfinancial and financial activities and draw on purchaser data held in various parts of their business, (for example, through online media).
BigTechs are applying new ways to deal with existing financial service products and others, for example, underwriting using big data and are also applying machine learning for their key business decisions, such as pricing and risk management across numerous financial sectors.
Incumbent financial firms have additionally expanded their dependence on BigTech firms to host center IT systems (for instance, cloud-based services, which can possibly further develop proficiency and security).
This fast and significant expansion of BigTechs in financial services and their interconnectedness with financial service firms are potentially creating new channels of systemic risks.
To achieve effective implementation and multiple objectives of financial regulation and supervision, a hybrid approach, combining a mix of entity- and activity-based approaches, is needed.