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The UK Financial Conduct Authority (FCA) will look into big tech firms’ access to large financial datasets following a market consultation last year, chief executive Nikhil Rathi has said.
“Big tech’s growing emergence in financial services has already made life easier for consumers, but it is still unclear how valuable their data will become in financial markets,” Rathi said on Monday (April 22) in a speech at the Digital Regulation Cooperation Forum (DRCF).
The FCA wants to work with big tech companies to examine how their data could be most helpful for financial firms and their customers in future, and to ensure competition evolves effectively, he said.
In a feedback statement following its consultation, published on Monday, the regulator said it will work with fellow financial regulator the Payment Systems Regulator (PSR) on the role of big tech in payments, and specifically digital wallets.
“Digital wallets are becoming a key part of the payment landscape, and it is important for regulators to understand the opportunities and the risks these pose for UK users of payment systems,” it said.
The FCA said that its collaboration with the PSR will inform the regulators’ respective approaches, ensure coherence and link to the wider digital regulatory landscape.
This work will also help inform the FCA’s review of the Payment Services Regulation as it undertakes the repeal and replacement of EU law. “We will set out in due course what this further work will entail,” the FCA said.
Open banking and open finance
If the FCA’s analysis finds big tech data to be valuable in financial services, it will look to incentivise more data sharing between technology companies and financial firms through its open banking and broader open finance work.
Meanwhile, if it finds potential risk or harms from non-sharing of data it will also look to develop proposals for the Competition and Markets Authority (CMA) to consider when it is given powers to regulate designated firms’ digital and data conduct, expected via the Digital Markets, Competition and Consumers (DMCC) Bill.
Further, the FCA has said it will also continue joint work with the Bank of England and the Prudential Regulation Authority (PRA) on the role of critical third parties (CTPs) and artificial intelligence (AI).
Use cases for big tech data
The FCA has also committed to identify and pilot "use cases" to test whether big tech firms’ data is valuable in financial services.
The FCA has said that this could include testing whether big tech data could be used to better inform firms of a consumer’s creditworthiness.
Further, the FCA has said it will consider how to use its regulatory tools to do so, including the regulatory sandbox, digital sandbox, innovation pathways or convening a regulatory "sprint".
The permanent sandbox welcomes data providers to apply to list their data on the platform and gain traffic and insights on usage, with the FCA saying that a pilot would provide it with evidence on the “key question” of how valuable big tech data is in financial services and the harms that could manifest, or benefits missed, from this data not being shared.
“We encourage firms to share with us potential use cases that we could develop as part of this pilot,” the regulator said, confirming that it will also provide further details on this work during Summer 2024.
In a statement shared with Vixio, Andy Thornley, head of financial services at industry group techUK, said that the FCA had so far found no significant effects of data asymmetry within financial services.
“Members have indicated the value of the data they hold has limited utility within financial services,” said Thornley, whose association represents the likes of Google and Microsoft. “However, the FCA will investigate this further, seeking use cases through their sandboxes.”
“techUK will continue to work constructively with regulators as this work continues,” he said.
