Technology companies like Apple, Google, and Amazon are crossing the boundaries and expanding their wings to overshadow the banking sector. Are banks prepared?
Technology companies like Apple or Amazon are crossing the boundaries and expanding their wings to overshadow the banking sector. World’s top advisors are pressing the banking industry to prepare for the impact the evolving technology will have on them. Giant technology companies such as Apple, Amazon, Google, Facebook, etc. are scrapping away the boundaries between industries. Disruptive forces such as Fintech companies are not as big a threat to the banking sector as tech giants that aim to be everything for everybody.
A Japanese tech firm paints the picture to show the banking industry and the world where the financial sector is heading. Banks should be worried because tech companies can completely eat away their business. Japan’s online retail marketplace, Rakuten also runs the country’s largest travel portal.
More than 800 million people use its messaging app. The app uses AI (Artificial Intelligence) technology to learn consumer behavior through their chat and make shopping suggestions according to the preferences of each individual. The company offers credit services and offers mortgages to the users, which had previously been the domain of the banking industry.
Another Asian e-commerce giant, Alibaba is also following a similar path by acting as a payment firm, lender, and an asset manager. In the west, however, technology companies are breaking into financial sector slowly. Amazon provides loans to small and medium businesses. Apple lets users send each other cash with their iMessage app. Facebook is integrating PayPal into its messenger app.
According to the World Economic Forum, financial firms rely on tech giants for evolving technologies such as cloud computing. The next generation of consumers is highly tech-savvy and prefers to use financial services from technology companies such as Google, PayPal, Amazon, etc.
Banks don’t control the messaging platforms. They don’t have access to the customers like technology companies. Technology companies are directly in touch with the customers via smart devices twenty-four hours a day. Banks are losing visibility to the customers and they cannot afford to be left only on commodified and low margin services.
Though big technology firms can take away their share of profits, they don’t pose a threat to their existence in any way. In the United States, financial regulation protects the banking industry from encroachment by the technology companies. Besides that, Banks also have a vast amount of customer data that they can use to develop new services to prevent the technology firms from entering their domain.
Banks are highly skilled in the Risk Management in the financial sector. People trust the banks more than technology companies with their data. Trust and security help the banks buy time and they are their key assets.
Banks cannot afford to lose business to the technology companies. People can borrow money without reaching out to the banks. Losing touch with the customers poses a threat to the banks, but banks can never compete with the technology firms in this domain. Though all is not lost for the banking firms, technology companies have started taking away their profits right under their nose.