WILL BIG TECH RESTRICT COMPETITION?
ALPH L&C GIVE THEIR OPINION

ALPH L&C

In October 2022, the FCA launched their Discussion Paper assessing the potential competition impacts of Big Tech entry and expansion in retail financial services (DP 22/5). Various views were invited from stakeholders, culminating in a Call for Input ending in January 2024. Essentially, this call for input wanted to focus on the competition impacts that may arise from Big Tech firms’ data advantages potentially combining with customer financial data sources.

Over the past few years, technology has advanced to such an extent that we can now run our lives through our mobile phones, from online banking to downloading the comparison site apps to find the best insurance deal.

In the FCA’s Call for Input in November 2023, Chapter 4 looked at potential competition impacts they wanted to explore. The FCA gave an example in that Big Tech firms with access to browsing data may be aware of the financial products that someone is searching for – particularly if they have this information in real time. They may understand an individual’s financial needs better through their users’ activity on social media and e-commerce platforms. As a result, Big Tech firms may be able to engage in sophisticated re-targeting using display and search advertising.

Consumer Duty asks firms to look at their communications with customers. Challenges to this can be Google and the character requirements within GoogleAds. Would there still be a level playing field if Big Tech could use sophisticated methods? Apps allow customers to manage their account and potentially interact with you on the go. In an ideal world, lenders may want to allow loan applications through an app, but does current tech allow this?

Short term lenders live with the FCA’s Price Cap on Credit but are you aware that if you have a product that offers personal loans through the Apple app then they limit you to a maximum APR of 36% (including costs and fees) with a repay in full date of over 60 days? Who made them a regulator?

The FCA suggest that Big Tech capabilities may assist with creditworthiness decisions by having an algorithm that analyses purchase history from their e-commerce platform against consumer behaviours and therefore the likelihood of repaying loans. They recognise concern that firms may not be able to compete on acquisition and retainment, that Big Tech could price discriminate and stifle financial services innovation.

The Digital Markets, Competition and Consumers Bill should be enacted this year and Competition Law will be updated, including the CMA’s new powers to fine businesses akin to the ICOs based on turnover. Will this be a chance to be tough on Big Tech?