Tech Giants Risk Squeezing Out Banks, French Watchdog Warns

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Payment services run by Apple Inc., Google and Amazon.com Inc. may need monitoring as the tech giants’ largely unregulated financial products squeeze out those of banks, France’s competition authority warned.

Big technology platforms “have the capacity to draw significant profits without being subject to regulatory constraints weighing on banks,” the authority said in a report on Thursday.

Popular brands, the loyalty of huge numbers of existing customers and extensive data sets give Big Tech a huge potential advantage in gaining new business, it said.

Banks risk being stuck with back-end transactions with high fixed-costs and strict regulation “while being marginalized” in customer-facing services where the value lies, the report warns. Ultimately this could call into question less profitable banking services such as handling cash or checks.

Regulators across the globe are ratcheting up scrutiny of powerful technology companies amid concerns that the pandemic has allowed them increase profits and expand into new businesses, such as financial services. Apple is expected to face a European Union escalation of an antitrust probe into its App Store rules for music streaming as soon as this week.

The French authority also highlights access to near-field communication on smartphones used for contactless payment, an issue that has already triggered EU and Dutch antitrust probes and potential legislation to respond to banks’ complaints that Apple unfairly blocks their access on its devices.

The companies that the French agency calls “les BigTech” are armed with “considerable financial power” to invest in new technologies and will have lower marginal costs compared to banks. Access to large volumes of data and processing power may allow them better assess customers financial health and offer them targeted services, the authority said.

Integrating payments in other services allows them to offer a “customer journey” that can’t be matched or replaced easily by competitors, the authority said.

The report also cites concerns over blockchain, over anti-competitive agreements or potentially an abuse by a person or organization controlling access to the blockchain.

Amazon declined to comment. Apple and Google didn’t immediately respond to a request for comment.

©2021 Bloomberg L.P.

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