Your Next Bank Could Be a Big Tech Company

Big Tech’s foray into financial services has significant potential for innovation and disruption. Yet, without proper regulation, it may create material risks for fair competition and financial stability.

The Apple Card, launched in partnership with Goldman Sachs in 2019. (Source: Unsplash)

Big Tech’s big competitive advantages

Technology companies hold four important competitive advantages that make them ideal candidates as financial service providers.

Source: Muzellec, Ronteau and Lambkin.
Source: Visual Capitalist.

Not all entrants are motivated by the same strategic considerations

While there are similarities in the competitive advantages enjoyed by Big Techs, not all companies that seek to enter into finance are motivated by the same strategic considerations.

  1. Those seeking to provide financial services to fill crucial gaps in existing infrastructure. These are, most commonly, tech companies operating in emerging markets characterised by poor financial infrastructure and low levels of financial inclusion.
Money being sent over M-PESA on a feature phone in Kenya. (Source: Forbes)
Source: Norman Alex.

It all comes down to regulation

The regulatory fabric that governs financial services is incredibly complex and varies substantially by region. Policy initiatives are often mandated by organisations operating at different levels of government, and not always aligned towards consistent objectives.

  • General Data Protection Regulation (GDPR), also implemented in 2018, seeks to apply sweeping restrictions over the right to use or share customers’ personal data. In addition to requiring customer consent, GDPR sets limitations on the ways in which personal financial data can be used and shared.
Differences between GDPR and PSD2 as they relate to issues of consumer consent. (Source: EY)
Sundar Pichai (Google), Mark Zuckerberg (Facebook), Tim Cook (Apple) and Jeff Bezos (Amazon) were summoned to give evidence over conference call during the antitrust hearing that happened in July. (Source: Wall Street Journal)

Our future in the balance

Big Tech’s recent decision to deplatform Trump and the millions of conservative voices on social network Parler have elevated concerns over the dangers of its unchecked power.

Hobbyist writer covering fintech, entrepreneurship, and other topics. Financial analyst, economist and MBA candidate. Published by the Startup.

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store