Tech giants: The future of finance?

Tech giants are continuing to push for a place in the banking world, and the banks are certainly taking notice. Brands like Amazon, Apple and Facebook are each exploring the integration of consumers’ financial processes into their existing technologies.

Should banks be worried? Some think so. Bill Withers, chief executive of Standard Chartered, says it’s risky for financial firms to assume that regulation constraints will stop these companies from advancing their fin-tech ambitions. And with tech companies’ propensity to find ways around complex rules, banks and credit unions are surely feeling the pressure.

What Lures Them In

Access to data seems to be the one of the strongest reasons why tech companies are aggressively moving towards fin-tech.

Ben Elliot, a policy analyst from Bloomberg Intelligences Washington, believes that consumers’ purchasing movements are what these companies seek for. Going into finance can give them access to consumer data that can serve to inform their business strategies and decisions.

What Fin-Tech Companies Can Contribute

While most lawmakers are concerned about these recent developments, there are others who see the prospect as exciting. Keith Noreika, acting head of the Office of the Comptroller of the Currency, believes that it’s about time that policymakers start entertaining the merging of commerce and finance. He contends that the goal should be about boosting economic growth, whereby traditional beliefs about separating the two areas mainly reflect obsolete thinking.

Indeed, tech giants are instrumental in today’s global economy. Automated mechanisms provide more streamlined services for the masses. Websites such as https://overdraftapps.com/ provide quick loan tips and recommended options for people who are otherwise ineligible to borrow from traditional banks. Outside the US, tech companies such as Alibaba are increasingly gaining momentum in online financial services.

The Cost-Related Downside

So is it only a matter of time before fin-tech gives us Apple Pay or Alexa Cash?

Maybe. But not without considerable costs and headaches.

Elliot says that no matter how intricate their technologies are, big techs cannot easily overcome the cost of regulatory burdens. The barriers in moving towards banking may just be too high and too costly for new players. Tech firms would need a charter, maintain minimum capital levels and adhere to government regulators.

For some, the more likely possibility is for tech companies to form alliances with the big banks. This way, they can still gain insight about their consumers’ spending without having to navigate through an unfamiliar territory.

Amazon for instance, is currently in discussion with banks including JP Morgan about a checking account service for retail customers. There are no concrete agreements at the moment, but should this happen it could give Amazon a new revenue source as well as data gathering opportunity, all while JP Morgan conveniently assumes regulatory matters.

Speculations about fin-tech as the future of digital economy are putting finance execs on the edge. While some experts are adamant that tech giants will have unfair leverage if they can maneuver their commerce with financial data, there are those like Noreika who are open to a shift towards merging sales and finance. If these tech giants can deliver banking services better than financial institutions, there might just be enough reasons to let them break new ground.