The impact of technology companies on competition in financial services studied by the FCA

The regulator said it had identified five emerging themes in these areas related to the entry of major tech companies into the financial services market, including the potential for these companies to launch innovative products and services in individual areas and subsequently expand their offerings into “complementary markets”. “.

The FCA said the “partner-based model”, which tech companies already use as the main way to enter the financial services market, is likely to remain the “dominant entry strategy” in the near term. It expects to see more direct competition in the future, saying that “significant market changes” could happen “quickly” once tech companies have initially established themselves.

The regulator said the benefits of market access could come from tech companies’ “own innovations” and their presence driving other players in the market “to innovate, improve quality and lower the prices of financial products and services through increased competition”. The FCA also said tech companies could use their business characteristics, such as scale and access to data, to increase their market share, warning of competition risks if this led to the exploitation of “entrenched market forces”.

The FCA’s discussion paper will be open for feedback until 15 January 2023.The watchdog said there are currently no plans to change policy or regulation to reflect tech firms’ entry into the financial services market, but it does intend to issue a feedback statement in the first half of next year to develop a response to comments received and how it intends to develop a regulatory approach.

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