IBS Journal October 2017
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raised $81B in nine months partnering with Tianhong. We should pay close attentions to Tencent and Ant Financial. especially with their newly launched financial market places (Licaitong and Caifu Hao respectively). These are among the more innovative digital platforms targeted at mobile millennials. In M&A there are an estimated 30-40 fintech Unicorns that might meet the scale objectives of Amazon or Google. The valuations are indeed high. They also have the cash to buy most banks given current valuations.”
At this point his argument gets very interesting. They obviously have no interest in the legacy infrastructure draped around the banks neck’s like an albatross – why not let the financial services companies own ‘manufacturing’ while others go after higher margin distribution and servicing? Then we can expect Google and Amazon to continue to wear the hat of orchestrator, investor and partner looking more for incremental growth he says.
Let’s get digital
According to The Economist Intelligence Unit, as IT giants such as Apple, Amazon, PayPal, and Google encroach on the financial services sector with their famed services matched precisely to consumer’s behaviour, banks are now citing implementation of their digital strategy as their number one priority. They are still staying at arm’s length.
The EIU report said that changing customer demands and new entrants and competitors will have a significant impact. When it came to the biggest competition in the future, 36% responding to the report said technology companies were the main threats. A total of 21% said that non-financial services firms such as retailers were the biggest threat, with only 13% citing new banks and 12% saying payment specialists such as PayPal were the ones to watch.
Apple could supplant banks when it comes to payments
The key areas identified by Arma Partners into which large-cap tech companies will seek to expand through acquisitions include:
Payments, which has been the area of early investment for the likes of Amazon, Google, and Apple, and the Second Payment Services Directive (PSD2) presents the opportunity for the internet giants to supplant banks as the customer interface to banking.
Wealth and asset management, particularly as AI becomes more prevalent in this field, enabling the large-cap tech companies to play the role of a search engine for and curator of financial products – but they are unlikely to issue balance-sheet loans themselves, and will need permission to capture more data than they currently do on users’ finances, objectives, and risk tolerances.
Business lending, where digital platforms’ use of analytics can circumvent the industry’s legacy issues around credit monitoring and provide more competitive and intelligent financing solutions.
Rodrigues also demonstrates that with the introduction of PSD2 the internet giants could become the customer interface of the banks, with the banks acting as the plumbing – in the same way in which the hapless telecoms giants have become mere pipes for the content that the over-the-top providers produce – the content.
Google Wallet is just the start, says Mark Rodrigues
There is also the question that, if Apple or Amazon gathers European user’s banking information via Application Programming Interfaces (APIs) why would users ever log-in to their banks? Why not just say to Siri: “What is my balance?” It is this elegance and ease of use that wooed the masses in the first place and which will give the Apples and the Googles of the world the momentum they need. In this case only the direction of flow is in doubt.
www.ibsintelligence.com
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