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June 24, 2024

Bank for International Settlements compares lending business model of big techs with traditional banks

The lending regulator shared its findings on the key differences.

The BIS compared the lending business model of big techs against traditional bank intermediation process based on collecting deposits at cheaper rates but making do with more limited information on clients. Large technology firms or big techs have access to massive amounts of data about firms that operate on their online platforms or use their QR-code payment systems. The BIS noted that big tech has two distinct advantages in securing clients, namely: (i) better information on their clients and (ii) better enforcement of credit repayment. This is attributed to how big techs can exclude a defaulting firm from their ecosystem. The BIS further noted that there must be a balance of privacy and efficiency in the handling of client data to achieve an optimal business arrangement.