As per a recent RBI paper titled “Bigtechs’ in the Financial Domain: Balancing Competition and Stability”, Large non-financial technology firms, referred to as “bigtechs,” pose challenges to financial stability owing to their technological advantages, large user base, wide-spread use by financial institutions and network-effects. Bigtechs include companies such as Alibaba, Amazon, Facebook, Google, and Tencent which usually hold service licenses through subsidiaries or JVs with varying levels of ownership control and jurisdictional regulatory advantages. Given their clientele, it is also possible for them to create products and establish a presence with greater ease vis-à-vis nascent fintechs.

The complex governance structure of bigtechs limits the scope for effective oversight and entity-based regulations. Further, due to the adoption of bigtechs as third-party service providers, they have become the underlying platform on which a host of services are offered. This uniquely positions the bigtechs to easily acquire cross-functional databases which can be exploited for generating innovative product offerings, making them dominant players in the market and this may lead to shadow banking activities which undermine financial stability.

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