The federal government is amplifying its scrutiny of major tech companies’ forays into financial services, as one of the Biden administration’s top antitrust critics announced her support for an ongoing investigation into the impact of those companies entering the financial sector.
In October, the Consumer Financial Protection Bureau ordered Google, Apple, Facebook, Amazon, Square (now known as Block), and PayPal to provide information about their business practices as it relates to their operation of payment systems. This week, the CFPB received additional support for its inquiry, in the form of a Dec. 21 statement from Federal Trade Commission Chair Lina Khan, who also sees the tech industry’s expansion into payments as potentially anticompetitive. Before joining the Biden administration in June, Khan was a fierce advocate for antitrust reform.
“Big Tech companies’ participation in payments and financial services could enable them to entrench and extend their market positions and privileged access to data and A.I. techniques in potentially anticompetitive and exploitative ways,” Khan wrote. “I will be looking to this inquiry and the findings it produces to help inform the FTC’s work,” she added.
In the statement, Khan also highlighted the potential for Big Tech’s algorithms to propagate discrimination and bias in the delivery of financial services. She expressed concern about the “single point of failure problem” presented by tech companies being both payment and authentication providers.
Earlier this month, the CFPB opened a related inquiry into the “Buy now, pay later” arrangements offered by emerging and established fintech companies. The agency cited the ease with which borrowers can accrue debt, regulatory arbitrage, and data harvesting as sources of risk for consumers as a result of the growth of companies such as Affirm, Afterpay, and Klarna. PayPal has also been asked to participate in this probe.
Khan’s main point is that the essential monopoly that these major tech companies have on people’s data is highly advantageous when they start offering financial services. “Their structural position coupled with their data troves could give them the ability to entrench and extend their market positions in potentially anticompetitive and exploitative ways,” she wrote.
Khan also sees consumer and antitrust risk in the expansion of these businesses from lending for small purchases into checking, larger loans, and business banking services. Those practices could become predatory, Khan says, because of the immense amount of personal data the tech companies already possess about their users, including geolocation, social connections, and browsing history.
She pointed out the possibility as well of these companies having the dual role of employer and lender, and the potential for exploitation of workers that could result.
“Uber, for example, already offers loans, bank accounts, and credit cards to drivers in multiple geographies, while Amazon markets its own payday lending services to its warehouse workers,” Khan wrote. “Some have expressed concern that this dual role could enable Big Tech firms to combine the significant data they collect monitoring workers with information on workers’ financial obligations, a combination they could use to personalize interest payments and calibrate exactly how long a worker must work to stay afloat.”
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