Traditional banking institutions have started to look into some of the very real threats they are facing - fintechs and tech companies emerge as competitors.
Traditional banking institutions have started to look into some of the very real threats they are facing. To start with, financial technology companies have emerged as agile competitors. And now, the Silicon Valley big players like Amazon and Google are planning to enter the race.
Pressuring the banks
As reported in the media, the Office of the Comptroller of the Currency made steps towards the realization of a plan proposing a charter for nonbank fintech companies. But there is more. Comptroller Keith Noreika made a suggestion that any firm could apply in theory.
So, it seems to be official – tech companies like Amazon and PayPal can easily emerge as powerful disruptors of the banking industry. Speaking of disruption, some experts argue that it is already happening.
“This is a classic missing the forest for the trees, looking at the charters.”, commented the managing partner of Federal Financial Analytics, Karen Shaw Petrou who spoke to American Banker.
She went on to explain that technology players can offer the structural equivalent of banking even without a charter.
And this is a reality, with Apple and Samsung offering their own payment apps. On the other hand, Amazon has reportedly lent more than $1 billion to small businesses since it first started dealing with loans. Also, their service Amazon Cash reportedly makes it possible for customers to take cash deposits from stores like 7-Eleven and Sheetz.
However, customers seem to be putting more thrust into banks, as stated in a research conducted by McKinsey.
While this is good news for banks, technology companies might emerge as major competitors in some financial areas. A recent survey by Bain & Co. concluded that Amazon and PayPal have earned customers` trust in nearly as high proportions as banks.
What is next for the banking sector? Imagine a bank powered by virtual assistants like Siri and Alexa. It might be a little far-fetched, but not highly improbable. It is to be seen what would be the banks` response and whether they would be able to retain the high levels of customer trust.