Tech giants like Apple, Facebook, Amazon and Alibaba are infiltrating the financial inustry more and more each year. Many of these big companies have revealed that key pillars of their growth strategies include initiatives to push their companies more into the financial sector over the coming years. This is a potentially serious competitive threat to many operating banks at this time. In this article we will talk about some ways that these tech giants are establishing themselves in the finance industry.
Amazon
Amazon, the largest ecommerce site in the world, has made some significant developments in the way that its customers can pay for its products and services. Amazon Cash and Amazon Pay are two examples of processes that Amazon has rolled out for customers to accomplish the financial transaction within Amazon’s boarders and purchase almost anything they need with ease. Amazon Cash allows customers to put money into an Amazon wallet which they can then use to purchase items online without ever having to use a debit card or credit card. It is designed to appeal to customers who prefer not to use debit or credit cards to purchase items online. Amazon Pay allows customers to use their already stored Amazon information, such as credit card information, to purchase items on other sites. This tactic of using Amazon Cash and Amazon Pay helps reduce the cost of interchange fees, which results in significant savings for Amazon in the process.
Apple and Google
Apple unveiled Apple Pay to the marketplace in 2014. Apple Pay is a mobile wallet that consumers can use to make purchases at any place that accepts that kind of payment. Google has a similar service called Google Pay, which can make app purchases quickly and also allow users to pay through an Android phone, smartwatch or tablet. These innovations in mobile and online wallets are giving traditional banks a run for their money. Pressure between these institutions could continue to create a competitive atmosphere in the financial industry.
Becoming Banks?
In spite of decades old legislative barriers such as the 1933 Glass-Steagall Act, and its subsequent modifications, big tech firms are knocking on the door of the finance industry and could potentially become banks themselves. To some, this is viewed as a significant threat to the industry and the competitive playing field; hence, legislation is currently being proposed to block, or at least limit, tech’s entry into this arena. Potential considerations would block tech from entering this industry, or block its ability to issue digital currencies. In light of tech announcements already, such as with Facebook and its Libra digital coin effort, Congress is getting poised for a battle on this subject.
Overall, banks and tech giants are already competing against each other and the consumer could reap the benefits from the competition and gains in efficiency that this produces over time.