Big Tech and Banking

The impact of technology on all industries is undisputed, and financial services are not excluded. Some of us might think that Big Tech companies are only working within social media, telecommunications, internet and e-commerce businesses but actually, they are providing their services in most "if not all" kinds of industries.

For the past years, we all have been noticing the variety of financial services that Big Tech (large technology companies) offers to retail customers, companies like Amazon, Apple, Google, Meta and many others use advanced data and key partnerships to dive deeper into banking and financial services. Barriers to entry in the financial industry are getting lower and tech giants are finding their way into the financial ecosystem by providing an outstanding experience to their customers and earning their trust day by day. Big Tech companies leverage few factors that make their financial solutions more appealing to customers. These factors are the customers’ data, the technology they use to deepen their customers’ understanding and the large consumer base that they already have, such factors make it easy for them to expand into financial services.

It will soon become the norm to send money to anyone in your contact list via your smartphone without leaving the apps you use or having to log into your bank app. Big Tech companies enable these advances, putting in mind that through the years each of those companies has made the best out of the data they collected. This gives them an advantage over anyone else to really bring benefits to their customers and offer banking services that suit each of their customers.

Before we go to some live examples, you first have to be familiar with the technology that made providing financial services so easy for any company in any industry which is what we call “BaaS”.

Banking as a Service (BaaS)

BaaS is the technology that allows any company to provide banking products and services to its customers with the use of APIs. In other words, a bank can enable a certain company to integrate a financial product into its current non-financial product. BaaS gives advantages to both banks (reaching new customers) and tech companies (offering banking products to their current customers) and also to customers themselves by empowering them with access to banking products in a more innovative, practical and flexible way. BaaS can be seen as the future of traditional banks; it gives banks the edge to compete with Neobanks and prevents current customers from leaving their current banks.

Now you are familiar with Big Tech and the use of BaaS so we can check together some live examples of where Big Tech companies used their data, technology and partnerships to offer financial features to their customers:

Apple and Goldman Sachs

In 2019, Apple revealed its Apple Card in partnership with Goldman Sachs and Mastercard, allowing iPhone users to sign up for the card through the Wallet app on their phones and use it immediately for digital purchases.

Apple Card provides a lot of benefits to Apple’s users. Benefits such as cash back, buying Apple products in instalments with zero interest, offering credit based on credit score, and zero annual fees are all possible with a slick titanium physical card that appeals to such users.

Shopify and Affirm

Shopify launched Shop Pay Installments, a buy now pay later product, powered by Affirm. A service that helped Shopify reach new customers, especially GenZ and Millennials. Shop Pay Instalments helped Shopify expand its services to more merchants, as they can enjoy a centralised view of everything from performance to product pages to inventory. The service helped merchants boost their sales and decrease the abandoned carts rate.

And there are many other partnerships in which you can see how Big Tech companies are penetrating the banking industry with the help of traditional banks like Amazon Pay, Facebook Libra and Google accounts with Citibank.

It's all for the customers

In the end, it may look like a competition or a fight between Big Tech companies, Fintech and traditional banks. But to me, it’s more an understandable development for the banking industry to meet the new trends and habits of the current and upcoming users, and also to take advantage of the huge technological rise that we are experiencing these days. Customers will always prefer customised, flexible, innovative and easy services whether they’re provided by banks, Tech companies or Fintech.