The limited expansion of Big Tech into retail banking activities in the EU (and the U.S.) is, at first sight, a puzzle.  Big Tech can leverage certain advantages like network effects and control over entire ecosystems to expand and disrupt the retail banking sector. However, the evidence suggests that Big Tech has made limited advances outside of payment systems in the wealthier countries. We advance several explanations for this puzzle. As it turns out, the overhaul of the financial regulatory framework following the 2008 financial crisis has significantly reduced the profitability of retail banking. To survive and adapt, banks have had to increase their efficiency significantly, further reducing the market’s attractiveness for Big Tech. Despite this, Big Techs have likely exerted a beneficial competitive constraint on incumbent banks. This may have led to a period of innovation in retail banking and healthy competition without endangering financial stability. However, competition authorities and banking regulation must cooperate to ensure this balance is not disrupted, and barriers for Big Tech to expand into retail banking are not artificially raised.

By Frederic Palomino & Miguel de la Mano1


Digital-technology-based developments have matured to the point whereby a dramatic change in banking and other financial services is possible. Such developments explain the involvement of Big Tech firms in the financial service industry.

In a geographicall


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