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Internet giants such as Alipay, Amazon pose existential threat to banks, says Bank for International Settlements chief

  • Huge amounts of data tech titans gather on customers may give edge over established banks, Agustín Carstens says
PUBLISHED : Wednesday, 05 December, 2018, 9:52am
UPDATED : Wednesday, 05 December, 2018, 2:46pm

Internet and “big data” giants like Amazon.com and China’s Alipay pose an existential threat to traditional banks, the head of the Bank for International Settlements, Agustín Carstens, said on Tuesday.

Carstens, who took charge of the central bank umbrella group a year ago, said the huge amounts of data that big internet companies gather on their customers meant they potentially have advantages over established banks.

They may have better information on customers’ spending and lifestyles, which might make it easier to judge the risks of providing a loan.

“This is very big,” Carstens, who was previously governor of Mexico’s central bank, said on the sidelines of a banking conference in London where he spoke on the growing influence of big data.

“This can be an existential threat to some financial intermediation firms so it is very important for us to get all of this early on and try to steer it without distortions.”

Alipay, the payments unit of Ant Financial Services, is already catching up with HSBC in terms of market capitalisation. The growth of Alipay and companies like Tencent Holdings has prompted Chinese regulators to take steps to be able to monitor them more closely.

Ant Financial is an affiliate of Alibaba Group Holding, which is the parent company of the South China Morning Post.

There are also questions over whether US giants such as Amazon, Google or even social media firms such as Facebook, could expand in financial services with similar setups.

“Each model is different, but what is universal is the exploitation of information,” Carstens said.

“Amazon doesn’t have much of an open financial intermediation model, they don’t have a financial arm like Alipay but there is nothing that prevents them from generating it.”

China's brick-and-mortar state bank looks to Alipay for help to embrace fintech

The key point was that it was not yet clear how much of a competitive edge social media and shopping data can give internet companies that go into financial services, he said.

From the perspective of the authorities, the questions are whether it will create any risky lending or destabilise the financial system in any way.

“We need an open public discussion,” he said in a speech entitled “International coordination is the name of the game”, which he gave at the conference.