Traditional banking methods are soon expected to become a thing of the past. New technological innovations are continuously working towards changing the meaning and impact of established financial institutions. Tech giants are at the helm of this revolution. With a lower barrier to entry, these conglomerates are making their way into the financial industry.
Nowadays, Big Tech companies like Google, Apple, Amazon, and Facebook are moving towards becoming bank-like. This would lead to increased value creation for their clients. These tech companies are capable of embedding themselves deeply into the financial behaviours of their customers. The companies operate a daily user base running in hundreds of millions. With such a terrific volume of users, they are capable of keeping their customers locked in their own ecosystem. But have you wondered how they’re adopting banking functions?
Tech firms have resources that allow them to deliver financial services at the right time and place due to access to vast pools of user data. They know about the purchases you made for your new house and for binge-watching Netflix on the weekend. Big tech companies aim to collect data while giving seamless transaction experiences to their users. They are partnering increasingly with incumbent institutions to deliver financial services efficiently.
Although big tech firms would not transform into proper financial institutions in the immediate future, they might as well at some point. Currently, their intervention into this domain is minimal – focused innovative solutions pertaining to credit cards or digital wallets. However, these firms are likely to have bigger and more sophisticated business models in the years to come. What’s certain is that the big tech companies foraying into financial services will be disruptive in their own capacity, and banks should take note of this. Banks may, in fact, have more to fear from big tech firms than fintech companies due to the alternate convenient lifestyle the former can offer to their consumer base.
It’s imperative, therefore, for financial institutions to embrace innovation at this time of exponential change. They should try building partnerships with fintech startups who are making use of innovative technologies. Through this, they can upgrade their offerings quickly and suitably for their customers. This also creates equally huge opportunities for tech startups to work closely with experienced institutions. Consequently, this would contribute to their transformation into effective alternatives to tech giants.