Tech Giants in the Banking Industry

Are Tech Giants a threat or an ally for the players in the banking sector? The predominance of these companies recently reached considerable heights and is now firmly rooted in our daily lives. Most financial players cannot deny that a giant burger is transforming a once closed market. Today, more than ever, Tech Giants have assets that make them more than competitive to traditional banks and even fintech: digital acceleration due to COVID-19, huge databases, efficient personalised customer journeys, unlimited budgets in R&D, and a non-banking business model. Banking services are “bonuses” to grasp market shares and strengthen their position in people’s lives.

Even though Tech Giants have already started planting seeds in the sector over the past few years, the current pandemic situation has sped up their growth. And because people and businesses are largely falling back to online and mobile banking services to manage their finances, they represent a clear and pressing danger. Apple Pay being one great example of threat on payments topics, traditional banks have come up with several answers by reconsidering their operating model to integrate concepts such as Open Banking, Blockchain technologies, partnerships with fintech, and paradoxically with Tech Giants (e.g., Amazon cloud computing), but it may not be enough. Banks are aware that new players Tech Giants could have a bigger impact than fintech start-ups because of what they can offer in addition to their existing businesses: a device that allows one to purchase its next summer shoes (with Google Pay) and to use it as its financial management tool (Microsoft Money Excel).

Banks cannot hide behind governments and regulators and they definitely cannot waste time. Many of them have taken actions and invested billions to improve their information systems and analytical tools. Banking groups are increasingly launching digital transformation instead of cost reduction plans, convinced that investment allows them to fight back. Like external disruptors, banks understood that data is not just a technical asset but, when managed well, an opportunity to transform the business and, thus, a way to defend and secure their sector. For now, partnerships seem to be the only solution Banks have found. But do they supply a means for the Giants to better enter the financial market? What if Google or Facebook takes advantage of those “superficial” partnerships and decide to set up a fully licensed bank organisation to offer loans or life insurances, besides their payment cards that are already on the market? The phenomenon of “uberisation” is likely to knock on the doors of banking services: digital wallet, mobile payments, a checking account. What next? 

Nevertheless, there is still a big step before they reach this point: regulators and governments may stop these velleities, protecting an already fragile financial system. Diem project, Facebook Cryptocurrency, face fierce opposition from financial authorities.  While in China, where BATX is developing fast, the government warns to calm down and not destabilise the banking industry. That said, the question is: are regulators truly able to prevent them from entering into a regulated yet free market?

Latest moves by the tech giants in the banking industry

> Google signs up six more partners for its digital banking platform coming to Google Pay. Read more
> Google Pay Users May Soon Be Able to Make Tap-and-Pay UPI Payments Via NFC. Read more
> UK, German, and Australian regulators unify against Big Tech. Read More
> Google Pay overhaul adds in-app banking with Citi, Stanford FCU and others. Read more
> China Orders Tech Giants to Unbundle Financial Services. Read More
> Deutsche Bank finalises a major cloud partnership with Google. Read more
> The Increased Threat of Google ‘Plex’ Accounts (And How to Compete. Read more
> Amazon expands its biometric payment offering to more stores. Read more
> The Apple Card’s new feature tackles one of the credit’s biggest problems. Read more
> Microsoft enters a bit more in fintech with « Money in Excel ». Read more

Conclusion | Banks & Tech Giants: Collaboration of Fight?

Are people (psychologically) ready to trust non-financial firms when it comes to financial services? Not sure about that… However, banks are now clearly threatened by the Tech Giants as the role and mission of the bank of the future is at stake. Established banks are lagging behind, and the margins to manoeuvre fast are limited. Despite a few surface partnerships, most banks are in constant search of a solution to maintain their position and their added value ahead of data companies that are always closer to their consumers. Their strength? They are fully aware of our purchasing intentions. This is what makes their model a cash machine: selling our data. Aren’t our banks perfectly familiar with our payments? It seems that the intention to sell is much more attractive than purchases made by the clients. Beyond the fact that it is a highly regulated market, data is key to this battle: to fight back against Tech Giants, banks must tap in tothe full potential of their collected data to better apprehend their clients’ behaviours, build a fluid and interconnected client experience, and rethink their products to offer differences in their features.