The Banking Executive Magazine - Issue 150, June 2021

The Challenge of Big Tech Finance In an old parable about banks and regulators, the banks are greyhounds – they run very fast – while the regu- lators are bloodhounds, slow afoot but faithfully on the trail. In the age of the platform economy, the blood- hounds are at risk of losing the scent. In 2009, in the midst of the global fi- nancial crisis, Paul Volcker, the for- mer Federal Reserve chair, famously observed that the only socially pro- ductive financial innovation of the preceding 20 years was the auto- mated teller machine. One wonders what Volcker would make of the tsunami of digitally enabled financial innovations today, from mobile pay- ment platforms to internet banking and peer-to-peer lending. Volcker might be reassured: like the humble ATM, many of these innova- tions have tangible benefits in terms of lowering transactions costs. But as a critic of big financial firms, Volcker presumably also would worry about the entry of some very large technol- ogy companies into the sector. Their names are as familiar as their serv- ices are ubiquitous: e-commerce be- hemoth Amazon in the United States, messaging company Kakao in Korea, on-line auction and com- merce platform Mercado Libre in Latin America, and the Chinese tech- nology giants Alibaba and Tencent. the BANKING EXECUTIVE 34 ISSUE 150 JUNE 2021 THE CHALLENGE OF BIG TECH FINANCE