LONDON: The European Union’s banking watchdog said on Tuesday that regulators have little understanding of the risks of banks creating digital marketplaces with tech companies and that a framework is needed to address potential infections if things go wrong. .
The European Banking Authority’s warning is the latest sign that financial regulators are starting to pay more attention to Big Tech’s growing relationship with finance, such as in cloud computing.
Finance and tech companies are coming together as banks establish digital marketplaces for products such as payments and mortgages, as well as other financial and non-financial services, a process that has accelerated since the pandemic began.
This means customers can pay or buy things using their mobile phone which is directly linked to their bank account.
This so-called platformization helps banks cut costs and reach a wider range of customers, and includes partnerships with technical groups.
Apple Pay, for example, allows debit and credit card holders of banks to set up Apple Wallet to make payments. Google and Citi have teamed up to enable users of the Google Pay app to open a checking account with Citi.
But the EU watchdog said the reliance on digital platforms for the marketing and delivery of services creates new forms of financial, operational and reputational interdependence.
The watchdog said the trend is presenting “certain challenges” for regulators in monitoring market developments and any risks from these interdependencies.
“Indeed, it appears that the vast majority of competent authorities currently have limited understanding of platform-based business models,” the EBA said.
The EBA said it proposes next year to develop a framework to collect information about dependence among banks on digital platforms and create indicators to assess potential concentration, infection and systemic risks. But it said the new law was not needed at this stage.
The watchdog called on the EU to update guidance on when a digital activity should be considered as a cross-border provision of services and therefore fall under EU and national laws that require information to regulators to improve visibility. it occurs.
The EBA said that very few banks said they had faced some issues in accessing the digital platform which they considered appropriate.
by hoo jones
This News Originally From – The Epoch Times