This post discusses RBI's concerns about Big Tech's presence in financial services and its proposed regulatory approach.

"In God we trust. In Big Tech we antitrust?" was one of our favourite stories from last year. It was about Big Tech's tussle with US and Indian anti-trust laws. And concerns of anti-trust regulators around Big Tech's monopoly. It also resonated with Big Tech's foray in India's financial sector. Which is making financial regulators equally anxious.

The RBI has also voiced its concerns in July, 2021. In its financial stability report, RBI flagged how Big Tech's foray in India's financial sector creates competition, operational, data privacy, and cyber security risks. RBI is fearful that Big Tech companies are too big to fail, which could pose systemic risks. 

With these concerns in mind, RBI has proposed a sketch of a regulatory framework in its report. The regulation will be two pronged: entity-based and activity-based. It will control financial risks and security-based risks. 

Given the risks, regulation of Big Tech in the financial sector is inevitable. But it is equally important to remember their contribution to democratising financial services. For instance, Google Pay and  PhonePe played a crucial role in the UPI success story. Which in turn promoted financial inclusion. Competition, data and financial regulators must coordinate on a national and global level to create an enabling regulatory framework. Agile technology needs agile policymaking. And the trick lies in finding the right balance (between regulation and innovation).

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