Emerging Technologies Transformations

Big Techs Join the Race

“Just as Amazon is expected to launch a basic account through a banking partner, Bain’s new survey finds that US consumers give Amazon much higher loyalty scores than they give banks. Among Amazon Prime respondents, 65% would be willing to try a free online bank account offered by Amazon. Even among people who don’t buy through Amazon, 37% would be willing to try.”

Bain & Company

In recent weeks and months, you would be hard pressed to not notice the rash of announcements from non-traditional players entering into the banking and financial services space. 

Some examples:

  • According to WSJ, Google will soon offer checking accounts to consumers in partnership with Citigroup and others, becoming the latest Silicon Valley heavyweight to push into finance. 
  • Uber has announced Uber Money offering and Uber Debit Account and Debit Card; Uber Wallet; Uber Credit Card in partnership with Barclays. According to Finextra, the first product out of the gate will provide Uber drivers and couriers with real-time access to their earnings after every trip through the Uber Debit account. 
  • Apple has partnered with Goldman Sachs to offer Apple Card – a credit card with unique and user-friendly features.
  • Facebook has announced a new payment system called Libra. In addition to this, Facebook has announced Facebook Pay. It will be available across Facebook, Messenger, Instagram, and WhatsApp, and it’s designed to facilitate payments across Facebook’s popular social networks and apps.

These and other ‘challengers’ are leveraging technologies to build innovative business models to deliver services to unserved or underserved segments. Some are focusing on digital-first experience. For example:

  • ChimeN26MonzoRevolut (general banking solutions)
  • Marcus (personal loans), BlueVine (business loans), Apple Card (a credit card from Apple), etc. are built to deliver the digital experience
  • Bread and Affirm offer point-of-sale financing solutions. Prosper marketplace connects borrowers and lenders.
  • Avant, which offers personal loans, gauges creditworthiness by using offline tools and machine-learning techniques to analyze hundreds or even thousands of variables to assess fraud risks.
  • Brex offers corporate cards for startups, e-commerce, and life sciences firms.
  • Some companies are using alternative data such as bank transactions, shipping history, cash flows, order history, social media data, etc. to make underwriting decisions. For example, Kabbage claims that over 95% of business loan applications are processed within 7 mins. Fundbox makes credit decisions within 3 mins using the applicant’s accounting software/bank account. Tala, serving traditionally under-banked geographies, makes underwriting decisions by analyzing data available on the applicant’s mobile.

KPMG summarizes this new path forward:

The financial services landscape is fundamentally changing. Today’s organizations need to shift to accommodate the opportunities and challenges created by new technologies and evolving customer needs. Part of that shift is a change in mindset: financial institutions need to accept that technology has become and will remain an integral part of financial services delivery. As such, financial institutions are increasingly becoming technology firms. Organizations’ cultures and operating models must adapt to this new reality. This may mean embracing new routes to profitability, new approaches to customer engagement, attracting and hiring a new type of employee, and more. While these changes will take time, developing strong partnerships with tech giants is a positive step in the right direction that will open up opportunities for greater growth and change in the future.