The RBI expressed three main concerns about large technology companies, including the latter’s potential to become dominant players in the financial services sector.

In its semi-annual Financial Stability Report The Reserve Bank of India (RBI), released yesterday, has raised concerns about the involvement of large technology companies in financial services.

Recognizing that Big Tech offers a range of digital services with a significant presence in payments, banking, wealth management, crowdfunding and insurance in advanced and emerging economies, and “a promise to support financial inclusion and drive efficiencies in the long term “Companies are also raising important policy issues such as privacy, cybersecurity, maintaining a level playing field with banks, operational risk, the challenge of antitrust rules and issues too big to fail, the RBI said in its report.

The concerns

Specifically, according to the report, there are at least three challenges Big Tech faces:

  • They span many different (non-financial) lines of business with sometimes opaque, overarching governance structures.
  • They have the potential to become dominant players in the financial services sector.
  • Large technology companies are usually able to overcome scale limits in the provision of financial services by taking advantage of network effects.


To address these concerns, the report also recommends that central banks and financial regulators use a mix of activity-based and company-based supervision. International cooperation is also important in view of the increasingly internationalized borders of the digital economy.

Activity-based regulation means imposing a set of rules on all actors offering a particular service, while corporate-level regulatory rules mean that a set of requirements are imposed on companies with certain licenses.

The report notes that an activity-based approach is already being used in anti-money laundering areas [AML] or the fight against the financing of terrorism [CFT].


As the Business hours As noted, this report comes months after the RBI-regulated NPCI (National Payments Corporation of India) imposed 30 percent caps on third-party apps using the Government of India’s United Payments Interface (UPI) in November 2020. Currently, Google, Facebook-owned WhatsApp, and Amazon are involved in providing digital payment services. In February, the Economic Times reported that Reliance, Facebook and Google have partnered to launch their own payment network under the New Umbrella Entity (NUE) framework.

While the government hopes NUEs, encouraging networks like UPI, would help ease pressure on NPCI, there has been some backlash. In February 2021, a PIL was filed with the Supreme Court for instructions to the RBI and NPCI to ensure the privacy of users of third-party payment apps and e-wallets.

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