Platform-based business models and financial inclusion

Karen Croxson, Jon Frost, Leonardo Gambacorta and Tommaso Valletti

No 986, BIS Working Papers from Bank for International Settlements

Abstract: Three types of digital platforms are expanding in financial services: (i) fintech entrants; (ii) big tech firms; and (iii) increasingly, incumbent financial institutions with platformbased business models. These platforms can dramatically lower costs and thereby aid financial inclusion – but these same features can give rise to digital monopolies and oligopolies. Digital platforms operate in multi-sided markets, and rely crucially on big data. This leads to specific network effects, returns to scale and scope, and policy trade-offs. To reap the benefits of platforms while mitigating risks, policy makers can: (i) apply existing financial, antitrust and privacy regulations, (ii) adapt old and adopt new regulations, combining an activity and entity-based approach, and/or (iii) provide new public infrastructures. The latter include digital identity, retail fast payment systems and central bank digital currencies (CBDCs). These public infrastructures, as well as ex ante competition rules and data portability, are particularly promising. Yet to achieve their policy goals, central banks and financial regulators need to coordinate with competition and data protection authorities.

Keywords: financial inclusion; fintech; big tech; platforms (search for similar items in EconPapers)
JEL-codes: E51 G23 O31 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2021-12
New Economics Papers: this item is included in nep-big, nep-cwa, nep-fle, nep-fmk, nep-mac, nep-pay and nep-reg
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