The big picture
Big tech pushing into finance is not new but a renewed effort is certainly at play. Why?
- Big tech does not want to be big finance (the banks) and it doesn't want to be valued like big finance. Big finance is too highly regulated, requires substantial balance sheets and infrastructure. Moreover the competition authorities and regulators are simply not going to let it happen.
- Big tech does want to understand big finance and wants the data. Much of big tech still does not know enough about the day to day financial habits of consumers. Financial services and payments in particular are a very sticky way to engage with users.
- Most of the companies and products in our graphic above can facilitate cross-border payments. Others like Facebook Pay could be expected to expand to cross-border at some point. So don't think cross-border payments is out of scope.
Why big tech is pushing into finance
There are many reasons - the biggest as we see them:
- For data: Bank accounts (Google). But realistically, everyone wants the data.
- Launch new products and open new revenue lines: Credit cards (Apple & Uber)
- Engage with new customers: e-wallets (Uber), Libra (Facebook)
- Keep existing customers in the ecosystem: Google Pay and Facebook Pay
Who could be most at risk?
- The new digital banks. Alone, these new players have been taking share from the traditional banks but big tech partnering with the big banks could give big finance a new boost.
- At any point, the tech companies could decide to grab market share by offering any of the services above for free (their upside is the data). Cross-border payments could be one of those products.
Overall, most of the big initiatives are at an early stage or yet to launch. The US is the primary testing ground as it is a known market and home territory for the tech players above. Cross-border payments will be impacted either directly or indirectly by virtually all the initiatives shown above. To what degree, it's too early to tell.