“Fintechs and incumbent banks could benefit should global regulators and competition authorities force large technology companies to share data to address competition concerns,” Fitch said.
As big tech firms step up their activity in the financial sector, regulators are concerned about their “ability to scale up and establish a dominant position quickly,” Fitch said.
The significance of big data has only been enhanced by the pandemic, which has pushed more business online — generating richer data and insights — and “that will shape the playing field for financial institutions,” Fitch noted.
Facilitating wider access to data could support innovation in the traditional financial sector, partly “by allowing sourced data to be used across silos, and enhancing credit data bureaus with insights gained through machine-learning technology,” it said.
Big data can also be used to inform credit-scoring models used for loan approvals, and to “market, distribute and price third-party financial services,” Fitch said.
While the potential uses for big data are significant, Fitch added that it’s not clear where regulators will come down on “how much data can and should be shared, which jurisdiction data resides within, if data security can be ensured, and to what extent big tech data repositories can truly be measured.”
Longer-term, Fitch said that it remains to be seen whether “the focus on payments processing by big tech and fintechs could […] herald a broader unbundling of banking services focused on fee-based income streams, relegating banks to provide white-labelled regulated banking infrastructure services with low returns.”