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Fintech startups have been working to overtake the stronghold of traditional banks on the financial services industry for several years at this point.<\/p>\n
And to some extent, they\u2019ve been successful. However, it\u2019s the so-called \u201cplatform companies\u201d that banks need to keep an eye on.<\/p>\n
McKinsey<\/a> and other consulting groups have warned the financial sector that Amazon, Facebook, and others are poised to shake up the space in a way that fintech just couldn\u2019t swing<\/a>.<\/p>\n And there\u2019s the fact that a growing number of millennials believe that tech companies could feasibly wipe out traditional institutions and replace them with their own take on financial products.<\/p>\n Every so often, new moves by Apple, Google, Amazon, and Facebook make headlines for their latest foray into finance. Think Apple Pay or Facebook\u2019s relationship-building attempts with banks.<\/p>\n But, what\u2019s on the horizon? Are we looking at a future where we buy our homes on Amazon or apply for auto loans using a social credit score?<\/p>\n Here\u2019s a look at what\u2019s happening with the platforms.<\/p>\n According to an Accenture survey from 2016, one in three banking and insurance customers would consider switching their accounts over to Google, Amazon, or Facebook<\/a> if it were an option. And a report from Bain and Co<\/a>. suggests tech companies are succeeding where alt-finance failed<\/strong> for a few reasons.<\/p>\n For one, tech firms already have the name recognition, trust, and the massive customer base required to drive change. Fintech startups, by contrast, had more niche appeal than anything and can be hard for the average consumer to understand.<\/p>\n It makes sense that Amazon could start successfully offering loans alongside bulk paper towels and unauthorized beauty supplies. It\u2019s easy.<\/p>\n As American tech companies are wading into the banking space, Asian companies are diving in<\/a>. Japan\u2019s Rakuten, the country\u2019s largest online marketplace and messaging app, already offers credit cards, mortgages, and securities services.<\/p>\n China\u2019s Alibaba also functions as a lender and payments processor and AliPay and WeChat<\/a> Pay are massively popular payment platforms that sidestep traditional banks altogether.<\/p>\n The greatness and danger of WeChat: China\u2019s Super App<\/p>\r\n Read now \u25ba<\/a>\r\n <\/div>\r\n <\/div>\r\n <\/a>\r\n <\/div>\r\n<\/div>\n Facebook started dabbling in payments back in 2015 and hired PayPal’s CEO to lead its messaging products group and added the ability to send payments to friends across the platform.<\/p>\n Then last year, the social networking behemoth enhanced the platform by allowing people to use PayPal as a funding source<\/a>.<\/p>\n Which\u2014fine. Square Cash and Venmo work more or less the same way. Plus, PayPal made similar deals with Slack and Skype anyhow.<\/p>\n But over the past year or so, the noise about tech giants making a play for the banking space has gotten louder\u2014which left us wondering, is something big planned?<\/p>\n Is your phone making money for somebody else? The rise of the mobile crypto-miners<\/p>\r\n Read on \u25ba<\/a>\r\n <\/div>\r\n <\/div>\r\n <\/a>\r\n <\/div>\r\n<\/div>\n In August, we learned that Facebook was trying to climb deeper inside our collective wallets, and now, Amazon and Apple are doing the same.<\/p>\n Apple is in the midst of launching a credit card with Goldman Sachs<\/a>, while Amazon is working on a peer-to-peer payments function where you can just tell Alexa to send money to a friend.<\/p>\n The big push into finance makes a lot of sense. Americans are increasingly using online banking\u2014as well as taking advantage of convenience from things like Venmo<\/a>, mobile deposits, and so on.<\/p>\n Facebook\u2019s whole deal was more about streamlining existing payment platforms than creating their own payments infrastructure.<\/p>\n The benefit for Facebook is, despite the fact that they\u2019re not creating new products, they will gain access to new datasets.<\/strong> And that\u2019s where banks will lose if they don\u2019t embrace automation and faster processing.<\/p>\n When you move small payments and transactions into Facebook Messenger or the WhatsApp chat box, it\u2019s those apps reap the real reward: data.<\/p>\n And banks, of course, lose out on that valuable resource.<\/p>\n While it sounds like a real \u201cwho cares\u201d situation, there might be a cost down the line.<\/p>\n When banks don\u2019t have data, they have a hard time developing new financial services and delivering accurate risk mitigation.<\/strong> Meaning, we might have to place our trust in big tech instead.<\/p>\n And after Facebook\u2019s myriad privacy gaffes, it might be a pretty big risk. On the customer side, those who continue to use traditional financial products may see lower quality offerings.<\/p>\n For example, it\u2019s harder for banks to identify risks without access to large datasets\u2014which could impact investments down the line.<\/p>\n While we\u2019re still enamored with our devices, many of us are starting to look at tech giants through a similar lens as we viewed big banks and Wall Street.<\/p>\n Platform companies have huge power as it stands. They\u2019ve provided the infrastructure powering the gig economy <\/a>and the sharing economy, which have had significant ripples throughout the economy-<\/em>economy.<\/p>\n While financial products are bound to get better when reimagined by tech, there\u2019s the risk that too much power falls in the hands of this small group of companies. Banks need to respond with better products and an improved customer experience \u2014 or risk the same fate as taxis or travel agents.<\/p>\n\nHow big tech is making a play for your wallet<\/h2>\n
Convenience and branding bring big advantages<\/strong><\/h3>\n
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\r\n <\/div>\r\n \r\n From Facebook to Apple, what\u2019s big tech got planned for our wallets?<\/strong><\/h3>\n
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\r\n <\/div>\r\n \r\n Why banks need to worry about losing data<\/strong><\/h3>\n
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<\/p>\nFinal thoughts<\/h3>\n