The Bank for International Settlements (BIS), an institution owned by the world's central banks, has issued a stark warning about the likes of Facebook, Alibaba, and Google disrupting the established financial system.
In its annual economic report, titled Big Tech in Finance: Opportunities and Risks, the BIS - commonly seen as the central bank of central banks - specifically cites Facebook’s new Libra cryptocurrency as a threat to existing payment services.
“Given their size and customer reach, big techs’ entry into finance has the potential to spark rapid change in the industry.”
Facebook, Alibaba, and cryptocurrency to disrupt finance
Facebook official launched a cryptocurrency, Libra, last week, but other “big tech” companies may soon follow. Gemini co-founder Cameron Winklevoss predicts that Amazon, Apple, Netflix, and Google will issue similar initiatives within two years.
Prediction: ever FAANG company will have its own coin within 24 months.
— Cameron Winklevoss (@winklevoss) June 17, 2019
Cryptocurrency aside, the presence of big tech in finance is arguably beyond the point of no return. In China, Alibaba’s payment initiative Alipay serves over 1 billion users. Meanwhile, Apple Pay counts 383 million users globally.
Libra could potentially serve 2.7 billion Facebook users, overlapping with the entirety of some 2 billion WhatsApp users globally. And, of course, Bitcoin now has a market capitalization of almost $200 billion.
Regulators must create a “level playing field”
The report warns that big tech companies will increasingly pivot towards financial services. By tapping into a huge pool of existing users, big tech can quickly launch a new financial infrastructure. And they have the brand recognition to pull it off, starting with Libra.
“Regulators need to ensure a level playing field between big techs and banks, taking into account big techs’ wide customer base, access to information and broad-ranging business models.”
Among the BIS’s concerns are the potential abuse of data and the emergence of digital financial monopolies, writing: “big techs have the ability to collect massive amounts of data at near zero cost.”