As the presence of large online platform companies called big tech grows in the provision of financial services, fair competition related to big techs is emerging as a major issue in the financial services industry. A recent BIS report predicts that big techs can eventually change the current market structure centered on financial services firms. The problem is that big techs can take the lead in the financial platform due to an inadequately prepared regulations rather than their potential technology and innovation capabilities. In this regard, it is necessary to secure fair competition related to big techs through proper regulations, and this study examines this issue focusing on the preparation of an appropriate regulatory system for big-techs’ anti-competitive behavior and the design of open banking that can promote fair competition.
Big techs have significant market power in their core platform. They can reduce costs by building an ecosystem consisting of services from multiple platforms on one platform, and also enjoy network effects. Big techs can also induce consumers to choose their own financial services through the design of the platform or ranking in search results, and can bundle subscription or use of a specific platform with financial products. Big techs can take advantage of this advantage to eventually limit competition by driving competitors out of the market or preventing the entry of potential competitors. In addition, big techs can utilize vast amounts of consumer data in the platform competition in the retail finance sector, and the gap in data held between big tech and competing platforms can lead to differences in service quality and undermine the competitive environment in the market. In response to this problem, many countries around the world are preparing systems for data portability and privacy. In particular, open banking, which gives financial consumers data portability to support fintechs’ entry into financial services sector, is being adopted in many countries.
Major countries such as the EU, the US, and the UK are preparing separate ex-ante regulations specifically focusing on big techs. Regulations in these countries include provisions to secure market competition, such as designation of regulated big tech, restrictions on data use, duty to provide data portability and interoperability, and ex-ante ban on corporate takeovers, and to prevent abuse of market dominance, such as prohibition of preferential treatment for own products.
Although open banking was introduced for the purpose of facilitating the advancement of fintechs into finance services sector, not only fintechs but also big techs benefit from the open banking, so fair competition of big techs related to open banking is also being discussed as an important issue.
In Korea, Naver and Kakao do not fall under big tech, but they are at the level that requires close monitoring according to the standards stipulated by Digital Markets Act (DMA) of EU. Therefore it is necessary to pay attention to the issue of fair competition related to their financial services business. As for the direction of the financial regulatory policy for fair competition, first, it is necessary to prepare an institutional device for mutual cooperation and coordination between the financial authority and the competition authority, and the financial authority need to respond to big techs’ anti-competitive business practices in order to protect financial consumers. Second, it is necessary to positively review to oblige big techs to share data with financial services firms subject to financial consumers’ consent.