Toby Crick and Louise Eldridge talk to PaymentEye about bigtech’s move into financial services


This article was first published on PaymentEye, 15 April 2019.

As regulators investigate bigtech’s move into financial services, lawyers and market participants remain at odds over whether bigtech will face the swathes of rules facing market participants.

“Google, Amazon, Facebook, and Apple (GAFA) do not want to be regulated, they will do everything in their power not to be regulated because if one of the GAFA owns a regulated entity it sucks up their entire management of finances, compliance, and operations,” says Shachar Bialick, CEO of Curve.

“Instead, they will partner with regulated entities like Goldman Sachs in order to achieve the product. It is not that Apple doesn’t have enough cash on their balance sheet to leverage, it’s not as if Apple cannot create this operation of underwriting of balance sheets, it’s not as if in six months Apple could not have a regulated entity live and streaming, it’s just that it has decided not to do that,” he says.

However, Toby Crick and Louise Eldridge partners at law firm Bristows, believe bigtech firms will aim to form their own banking entities.

“I think there is a lot of criticism of the bigtech groups at the moment, they are massively underregulated, but as soon as they get banking licenses, they will be regulated just like banks, so that regulation thing will go away,” says Crick.

“When you’ve got new entrants into the market such as bigtech into financial services, and they are changing things through disruption, then inevitably there is going to be greater competition because the large financial institutions are going to have become more agile, and a bit more customer centric,” adds Eldridge.

On March 28, vice chairman for the supervision of the Board of Governors of the Federal Reserve System, Randal Quarles said the entrance of bigtech into financial services “raised a number of issues, some of which may touch on financial stability.”

On April 8, the Bank of International Settlement (BIS) published a working paper on the structure of financial intermediation.

The paper notes the entrance of bigtech could lead to greater concentration rather than competition, with the authors pointing to greater reliance on third-party service providers – particularly for data storage – currently taking place in the market.

This came after a report commissioned by the European Commissioner for Competition, Margrethe Vestager, stated that “there is a reasonable anxiety that, fearing that the market could tilt against them, dominant platforms and ecosystems would have strong incentives to engage in anti-competitive behaviour.”

For Crick and Eldridge, while bigtech firms are leveraging the vast amount of data they have on consumers, this may be an advantage, but not necessarily an unfair one.

“They have a clear advantage because they are digitally savvy across all elements of their business,” says Eldridge. “They can analyze data, they can use all sorts of newer technology such as artificial intelligence and machine learning to get better insights into their customers, unlike large financial institutions where that data is typically siloed, and therefore isn’t shared to the best advantage of the bank, or the best advantage of the customer.”

“Do they have an unfair advantage? Well the banks have tons of knowledge. They know every single transaction that any of us do. Do they have an advantage in the sense that they don’t have huge legacy banking systems, and so can just start afresh with something clean that works? Yes, but that is not an unfair advantage,” adds Crick.

Toby Crick


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