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views or policies of the Asian Development Bank Institute (ADBI), the Asian
Development Bank (ADB), its Board of Directors, or the governments they represent. ADBI does not guarantee the accuracy of the data included in this paper and accepts no responsibility
for any consequences of their use. Terminology used may not necessarily be consistent with ADB official terms.
• BigTech is a world of permanent disruption – what implications for financial stability during
transition periods
WHAT CAN FINTECH AND BIGTECH DO AND
WHAT CAN THEY NOT?
• Payment services – wallets, direct payments (outside standard payment system)
• Use of block-chain (example: cross-border remittances by Ecobank in Africa)
• Financial intermediation
• Banks keep money-creating function
• BUT: BigTech issued currencies (Libra) – can they take this role?
• FinTech and BigTech focus on segments where (i) have cost advantage (large scale, small
value) and (ii) most profitable
BIG DATA AND AI:
HARD VS. SOFT INFORMATION
• Availability of more data and ability to process them has increased efficiency and outreach of
financial sector enormously
• Credit scoring for SMEs and consumer credit
• Overcome lack of hard assets, documentation etc.
• Allow costumers to build and own their reputation
• Off to the corner – give up on the softies? NO
• Relationship vs. transaction-based lending during the crisis (Bolton et al., 2017; Beck et al., 2018)
• Have you talked to your banker recently?
• Looking for customer service – or rather the police? Example N26
BIG BANKS VS. BIG TECH
• DNA cycle implies winner takes all (remember Myspace?) – rise of new systemically important
institutions?
• Competition implications (capturing other markets)
• Further increase in correlated behavior? Among “financial” institutions, market participants?
• New forms of risk: cyber risk
• Stability implications – too big to fail? Access to financial safety net?
• Not subject to formal safety net, but what in times of crisis (remember MMF in US in 2008)
Important difference in views: rational (credit constraints) vs. behavioural (myopic, literacy)
• Rational view: more data allows more inclusion, lower costs allow more outreach
• Behavioural view: more data allow price discrimination and targeted shrouding (more
important in finance, given intertemporal nature of contracts)
• Does better data availability also give an advantage to BigTechs?
• Need for stronger consumer protection?
• See work by Antoinette Schoar and others
• Who Owns the Data?
THE MANY DIFFERENT FORMS OF MONEY
Payment services
THANK YOU
THORSTEN BECK
WWW.THORSTENBECK.COM
@TL_BECK_LONDON