Rama Krishna Sangem
Big is beautiful, but risky too, says Reserve Bank of India (RBI). The central bank has cautioned that Big Tech companies that can quickly become “too big to fail” and dominate markets, could present significant challenges in assessing risk profiles due to their unique characteristics, extensive group entities, interconnected activities, and transnational presence.
The RBI’s Currency and Finance Report for 2023-24, which was released on July 29 Monday, said that there could be adverse economic and welfare outcomes with collection of extensive data by Big Techs, which they can utilise to favour their own products.
The report also cautioned that higher margins obtained by Big Techs by making financial institutions access prospective clients via their platforms, engaging in product bundling, and cross-subsidising activities, may have adverse outcomes.
6 banks collaborated with 7 big techs
In India, six banks have collaborated with seven Big Techs in the UPI payment space and most of these collaborations involve private banks. Big Tech-backed applications have made their mark in the Indian payment industry, with more than 90 per cent share in UPI payment volume and value, the report said.
Big Tech platforms offer multiple contactless payment options such as payment through gateways, platform-specific digital wallets, co-branded credit cards, converting purchase bills into equated monthly instalments (EMIs, or no-cost EMI), and Buy Now Pay Later (BNPL).
Five Big Techs have entered into collaborations with four private banks and five non-banking finance companies (NBFCs) for offering BNPL through their platforms. Co-branded credit cards are also offered in collaboration with the four banks, the report said.
Co-branded credit cards
Standard EMIs and no-cost EMIs are the most available lending options on Big Tech platforms. These EMIs are offered mainly through three channels: co-branded credit cards, credit and debit cards of banks, and BNPL.
At the same time, the RBI has suggested that there exists scope for seamless integration between financial services and non-financial Big Tech platforms to enhance user experiences. Adoption of digital technologies has enhanced efficiency of Indian banks and increased competition within the sector, the report said.
Additionally, it highlighted that digitalization in the financial sector enables banks to reduce various risks and improves integration across various financial markets, thus, boosting liquidity in these markets
