Alejandro Díaz de León: Introductory remarks on regulating big
tech
Remarks by Mr Alejandro Díaz de León, Governor of Bank of Mexico, at the Bank for International
Settlements Conference "Regulating big tech: between financial regulation, anti-trust and data
privacy", 7 October 2021.
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I would like to thank the BIS for inviting me to participate in this panel on Bigtech and data in
finance, and discuss what does the entry of big techs in payments mean for competitiveness
and financial ecosystem and the challenges it represents for central banks.
Recent advances in technology and innovation have created the potential for a structural
transformation in payment and financial services (platform payments and platform finance).
The inclusion of networks with a wide customer base in the financial ecosystems, the so-called
Bigtechs, seeks to link customers with financial services, either provided by financial
intermediaries or themselves.
This raises key issues for public policy, in terms of competition, consumer protection and
financial stability.
An open finance ecosystem could have several benefits, better services, lower costs and deeper
financial inclusion, but authorities should be careful and avoid potential suboptimal results
(concentration, vertical integration, lack of interoperability, etc.).
An open finance ecosystem without adequate regulation will not deliver the desired public goods.
Bigtechs providing payment and financial services are clearly part of our financial ecosystem.
We must work on the necessary technological and regulatory conditions to avoid regulatory
arbitrage.
It must be clarified that a level-playing field is not against innovation. Instead, it is a response by
policymakers to avoid the "winner takes all equilibrium in networks" and "too big to regulate"
problems, as conditions needed to promote competition, sound risk management and public
interest.
To promote a well-functioning payment systems and a more inclusive and efficient financial
system and to make a good use of the opportunities offered by new technologies, we have
identified seven public policy anchors to guide this process:
1. Same risk / same regulation: o align incentives to achieve maximum social benefits, o
addressing market failures and o promoting an environment for competition. Level playing
field on AML/CFT requirements, legal, financial and operational risks.
2. Interoperability and neutrality: Need to avoid large networks using their condition as a
competitive advantage to carry financial transactions exclusively through their networks.
3. No kingmakers: Large networks joint-venturing with specific financial institutions could
extend the former's market power and concentration to financial markets.
4. Ensure business continuity with large foreign providers: The failure of a Fintech or
Bigtech could have substantial spill-overs.
5. Global coordination to address jurisdictional gaps.
6. Client protection.
7. Cybersecurity.
Mexican Financial Authorities are working on the adoption of these policy anchors.
The cornerstone for a healthy open financial and payment ecosystem is a safe and robust
infrastructure, and central banks play a key role on four core elements:
1. A robust infrastructure for clearing and settlement is imperative for low, medium and
large value payments (24/7 services).
2. Strong authentication and validation infrastructure.
3. Plug-in arrangements such as APIs to provide access to new participants to the
network, including Bigtechs.
4. Capacity to operate ledger services, as a requirement to implement a CBDC facility.
Another involvement of Bigtechs in the financial system that central bankers must evaluate is the
provision of back-office services to the financial system.
A clear example is on cloud computing, that could entail business continuity and systemic risks.
I conclude stressing that developing an open payment and financial ecosystem safeguarding
public interest should be at the top of the local and international agenda:
1) Adequately regulated, Bigtechs and large customer networks could help promote
financial inclusion in three key dimensions, payments, investing and financing.
2) Payment systems are inherent to central bankers in their provision of money.
Leveraging on the latest technology and developing fast retail payments and CBDCs, are
of utmost importance for central banks