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Will Tech Giants Disrupt Banking?

“Some bankers and analysts think that Google, Facebook, Amazon or the like will not fully enter a highly regulated, low-margin business such as banking. I disagree. What is more, I think banks that are not prepared for such new competitors face certain death.”

This statement, issued by Banco Bilbao Vizcaya Argentina (BBVA) CEO Francisco Gonzalez in the Financial Times, while not entirely expressing a new sentiment, illustrates how pervasive the fear of tech giants and their market movements is becoming.

With more and more banking services migrating to mobile phones and online channels – the wheelhouses of tech giants like Google, Facebook and Amazon, Gonzalez warns that these companies could be primed to compete with banks in the market.

This may sound far fetched at present, but Gonzalez isn’t alone is his sentiment. Gonzalez’s statements bring to mind the uproar over rumors that Facebook was entering mobile payments earlier this August. Based on initial reports that proved false, major media outlets began declaring that Facebook was secretly testing a mobile payments system, however, the stealth project was revealed to be a login service for mobile apps that while a step in this direction, was hardly a huge pivot.

This case aside, Gonzalez broke down the advantages mobile-savvy tech companies would have in the banking sector, noting that tech companies would be free from the “legacies of banks,” as well as what he called their obsolete systems and costly distribution networks that prohibit them from services such as timely customer service and real-time payments.

A look at past events in payments would suggest major tech giants will still need a lot more experience before they can replace banks, having already failed to leverage these advantages.

Google’s foray into the sector with has been marred by setbacks and criticism. Instead of disrupting the mobile payments space with its Google Wallet service, low NFC adoption has forced Google to move closer to traditional financial tools such as plastic cards.

Further, Facebook failed at moving to leverage its user base for payments, shelving its virtual in-house currency service Credits in June. The announcement ended a service that Market Platform CEO Karen Webster said could have become a tool for currency conversion and POS purchases.

Still, observers won’t count tech companies out.

“Google has a ton of online experience and eyeballs, and a bunch of interesting assets to leverage, including all of the things that come with its Android platform and Motorola Mobility assets,” Webster wrote this past March. “Google could very well decide to turn its thinking about payments on its ear and approach the problem set and use cases in a very different way.”

And Google isn’t alone in having substantial assets to leverage. Facebook, Amazon, and of course Apple, are never far from the conversation.

Now that we’ve weighed in, tell us your thoughts below. Do you, like Gonzalez, see tech companies as a threat? Do you see them as a potential partner? Or just a non-factor in the payments equation?

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Latest Insights: 

Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. The July 2019 edition of the FI Innovation Readiness Playbook examines how the innovation playing field is leveling as small FIs implement bolder strategies and larger banks adopt more measured approaches.

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