ESAs recommend steps to enhance the monitoring of BigTechs’ financial services activities

The European Supervisory Authorities (EBA, EIOPA and ESMA – the ESAs) on 1st February 2024 published a Report setting out the results of a stocktake of BigTech direct financial services provision in the EU. The Report identifies the types of financial services currently carried out by BigTechs in the EU pursuant to EU licences and highlights inherent opportunities, risks, regulatory and supervisory challenges. The ESAs will continue to strengthen the monitoring of the relevance of BigTech in the EU financial services sector, including via the establishment of a new monitoring matrix.  

In 2023 the ESAs, via the European Forum for Innovation Facilitators (EFIF), conducted a cross-sectoral stocktake of BigTech subsidiaries providing financial services in the European Union (EU) as a follow-up to the ESAs’ 2022 response to the European Commission’s Call for Advice on Digital Finance.

The stocktake showed that BigTech subsidiary companies currently licenced to provide financial services pursuant to EU law mainly provide services in the payments, e-money and insurance sectors and, in limited cases, the banking sector. However, the ESAs have yet to observe their presence in the market for securities services.

To further strengthen the cross-sectoral mapping of BigTechs’ presence and relevance to the EU’s financial sector, the ESAs propose to set-up a data mapping tool within the EFIF. This tool is intended to provide a framework that supervisors from the National Competent Authorities would be able to use to monitor on an ongoing and dynamic basis the BigTech companies’ direct and indirect relevance to the EU financial sector.

The ESA will also continue the cross-disciplinary exchanges in the setting of the EFIF to further foster the exchange of information between EFIF members and other relevant financial and non-financial sector authorities involved in the monitoring of BigTechs’ activities (e.g., data protection and consumer protection authorities).

Background

For the purpose of this Report, BigTechs are large technology companies with extensive customer networks, which include firms with core businesses in social media, internet search, software, online retail and telecoms.

The Report published this month was one of the EFIF’s work priorities for 2023, and extends the analysis conducted for the 2022 Joint ESAs Response to the European Commission 2021 Call for Advice on Digital Finance and related issues, which proposed recommendations in relation to the regulation and supervision of more fragmented or non-integrated value chains, platforms and bundling of various financial services, and risks of groups combining different activities. The EFIF provides a platform for supervisors to regularly share experiences from their engagement with firms through innovation facilitators, to exchange technological expertise, and to reach common views on the regulatory treatment of innovative products, services and business models.

The EFIF was established following the 2019 Joint ESAs report on regulatory sandboxes and innovation hubs which identified the need for greater coordination and cooperation between innovation facilitators to support the scaling up of FinTech across the EU single market. The findings of the report have been updated in the ESAs Report on Innovation Facilitators published in December 2023.

Members of the EFIF include representatives of each innovation hub and regulatory sandbox established by national and European supervisors within the EEA. The EFIF unites representatives from all 30 countries in the EEA, covering the banking/payments, insurance and securities/markets sectors.  More information about the EFIF can be found here.

For the purpose of this report, BigTechs are large technology companies with extensive customer networks, which include firms with core businesses in social media, internet search, software, online retail and telecoms.