Welcome back to our TechTrends series where we’re rounding up industry news from across sectors. This week, we’re taking a look at how big tech is entering into financial products.
In TechTrends Week 5, we discussed how the buying habits of Millennials and Gen Z has increased the need for large banks to digitally transform and create new and innovative products for today’s market, especially if they want to become future-proof.
However, large banks have been slow to transform, and tech companies have been watching. They’ve already disrupted other industries, and those markets will never be the same. Netflix redefined the home video industry, Apple re-imagined the music sharing industry, and Uber reinvented the ride-hailing business, to name a few. This gave consumers digitally innovative products they didn’t know they wanted, and set the standard for future business models.
Not only are these big tech companies built differently than large banks; i.e. no legacy systems and silos to slow development down, but they are at the front-lines when it comes to delivering on new-age technologies with great front-end experiences. We’re now seeing big tech make their way into the financial services sector with products like the Apple Card, Google Pay, and Samsung Pay, but this is just the beginning. If banks and financial players want to stay relevant and beat new insurgents, be that big tech or startups, they need to act and operate like technology companies.
Let’s take a look at how some of the tech giants are re-imagining banking and finance by using their exceptional technology to create digitally innovative products:
Uber announces deeper push into financial services with Uber Money
Many consumers already have Uber’s credit card, but now the ride share company has announced a new division of the business for their employees: Uber Money. This will include a digital wallet and upgraded debit and credit cards that will help expand Uber’s efforts of making ride sharing smarter, painless and superior for their 4 million-plus drivers and couriers around the world by giving them access to a mobile bank account so they can get paid right away after each ride.
Why banks must be wary of Apple, Amazon, Google, and Facebook
With large banks being slow to evolve to meet the consumers’ needs in a digitally changing world, customers are willing to switch over to a technology company that meets their demands. Previous poor experiences, marred by lackluster customer service and meaningless products, has allowed for tech giants like Apple, Amazon, Google, and Facebook to focus on offering solutions that are winning over traditional banks’ current customer base and gaining a competitive edge.
Can Apple or Amazon really become a bank?
Many fintech startups are entering the banking and financial industry, and have been able to create digitally innovative products that customers want, giving large banks a run for their money. However, a lot of these players don’t have the scope and scale to become a full stack bank (build complete products and/or services in house without partnerships and own the entire design, manufacturing, and distribution), but neither do large legacy banks as they are heavily reliant on the banking ecosystem. So, Apple and Amazon have the opportunity and the means to become a full-stack bank.
Google eyes consumer banking market with checking account
To add to their portfolio of digitally innovative products, Google is also eyeing the consumer banking market with a checking account. Launching in 2020, Cache will partner with Citigroup and SFCU to handle customers’ accounts. With Amazon, Apple, Uber, and Facebook also eyeing this market, there will be many digital options for consumers to choose from, with the goal of these tech giants to become indispensable.
Big tech companies that are highly known for their innovative technology, such as Amazon, Uber, and Facebook are just the beginning of a trend that we believe will continuously grow. At the beginning, Apple and Amazon reinvented two areas of business forever: electronics and retail, by taking ease-of-use and consumer friendly to the next level. Now, more tech giants have hopped on this ride and disrupted other industries, and are looking for their next big thing. As these companies and others compete for market share and look into new verticals, financial services is a prime target. However, we know it’s not just banking and payments that have these companies working on where to enter next; we’re seeing the news about Amazon entering the Indian insurance market and Google entering into healthcare through partnerships. They’ve already taken over other industries, so it’s just a matter of time before they figure out their next victim. And what we know so far is that the majority of Americans are willing to try a product from a tech company they’re familiar with, especially millennials. The questions aren’t around if they can become a fully-fledged bank, but when are they entering the market and what are current banks going to do to respond.
Interested in learning more about digital banking trends? Read our blog post on what they are and what large banks can do to answer.