The International Monetary Fund (IMF) predicts that the major technology companies will have a growing influence over the financial services sector over the years ahead.
The IMF regards this as a mixed blessing, with modernisation and greater efficiencies improving the speed of payments and availability of loans but also raising concerns about data privacy and the concentration of power among a small number of mega-corporations.
In a speech at a G20 meeting in Fukuoka, Japan, the IMF’s managing director, Christine Lagarde, said that “a significant disruption to the financial landscape is likely to come from the big tech firms, who will use their enormous customer bases and deep pockets to offer financial products based on big data and artificial intelligence,”
Technology companies could bring more unbanked people into the financial system, privacy, competition and market-concentration concerns that accompany that business models “could lead to vulnerabilities in the financial system,” she warned.
China’s dominant duo
Lagarde singled out the success of Chinese technology companies as a sign of things to come. Tencent’s WeChat Pay and Ant Financial Alipay dominate the country’s digital payments market.
“Over the last five years, technology growth in China has been extremely successful and allowed millions of new entrants to benefit from access to financial products and the creation of high-quality jobs,” she said. “But it has also led to two firms controlling more than 90% of the mobile payments market.”
The IMF wants world leaders to take more action to address the increased use of fintech, which, by controlling payment and settlement systems, could make the international financial networks vulnerable.
“This presents a unique systemic challenge to financial stability and efficiency, and one I hope we can touch on during the G20, and address in a cooperative and consistent fashion,” Lagarde said.
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