How might Big Tech affect financial inclusion and stability?

New technologies and widespread internet and smart phone adoption have led to an increased availability of digital financial services, many of which are offered by non-traditional financial-service providers including so-called Big Techs such as Apple, Alibaba, Amazon, Facebook, eBay, Google, and Tencent. A recent analysis published in Contemporary Economic Policy notes that the entry of Big Techs into the financial landscape can lead to innovative financial services and also enhance financial inclusion by making these services available to people who have traditionally been excluded from financial services offered by banks.

The authors examined whether financial education—which is meant to improve people’s financial knowledge, skills, preferences, and attitudes—can help people reap the opportunities that Big Techs can provide for financial inclusion, and they assessed how the potential financial inclusion that is stimulated by Big Techs might affect the overall financial stability of a country.

“About one in three adults globally does not have a bank account. This makes them vulnerable, as they have limited possibilities to save during good times and rely on savings or credit during bad times. Although Big Techs have a potential to enhance financial inclusion, it is important that people have the required knowledge and skills to appropriately use their services,” said corresponding author Anneke Kosse, former Research Advisor at the Bank of Canada. “At the same time, the financial-inclusion opportunities brought by Big Techs should not introduce risks to financial stability. We therefore provide further insights into the interlinkages between financial education, literacy, inclusion, and stability.”