The fintech movement and made significant inroads into the finance value chain. The proliferation of internet and mobile phones has made it possible to bring financial services to the unbanked. The adoption of fintech apps skyrocketed throughout the Covid-19 pandemic, opening up a plethora of opportunities which hitherto did not exist. Due to its scalability, this has spurred rapid growth in the sector with and likewise investor interest in this category. Fintech had one of the most successful quarters in history in Q1’21, with record deals, funding, exits, and mega-rounds.
Eager to turn the ongoing fintech boom into an advantage, tech giants such as Google and Apple, have emerged through the backdoor and shouldered their way into the fintech ecosystem. With a string of strategic acquisitions, big tech giants are making inroads from digital banking and lending to budgeting and payments. Fintech may be just another revenue pipeline, but it also presents an opportunity for teach companies to harvest data on spending patterns and understand their customer base.
What are steps Apple & Google takes to enter the fintech market?
Apple and Google are two tech giants that are vying for a presence in the financial market. Moving forward beyond payments, both companies have made their goal to be major players in the sector an open secret. Both companies have made significant acquisitions that will provide them with a long-term competitive edge and a larger part of the fintech industry.
Apple’s foray into fintech began in 2012 with the launch of the Apple Passbook, which allowed users to save plane passes, cinema tickets, discounts, and loyalty cards all in one location. In 2015, Passbook was renamed Wallet. Apple Pay, which put privacy at the center of the design, was launched in 2014 after the Cupertino consumer tech giant tested the waters. Apple Pay makes use of the NFC-based payment system to make transactions possible.
According to Bank Innovation, Apple came close to buying Discover Financial Services, based in Illinois, for $37 billion in 2014. In 2019, Apple and Goldman Sachs launched a credit card that eliminates processing fees and adds a new layer of privacy and security. The Apple Card was introduced in 2020 as a method to strengthen the company’s engagement with its consumers. While it’s not providing extra rewards such the Chase Sapphire Preferred benefits, for example, it’s still has a couple of great benefits, especially for Apple loyal customers and fans.
Apple is continuing to place a premium on privacy and security. They promise that their consumers will “not be the product” of their services, which means that they will not gather or sell their personal information in order to profit from it. This approach might provide the organization with a competitive advantage in the market.
With the debut of Google Wallet in 2011, Google entered the financial market a year ahead of Apple. Users may make payments with Citi and Mastercard using this wallet. At the I/O developer conference in 2015, Google launched Android Pay, which uses near-field communication (NFC) technology to enable transactions. Google Pay consolidated Google’s digital payment capabilities in 2018, allowing customers to pay on their desktop, iOS, phone, and desktop. With 6.7 core monthly users, Google Pay has become the most widely accepted non-banking alternative in India.
Google boosted its financial aspirations by announcing the introduction of a checking account product in 2020 in partnership with Citigroup, which will be accessible via the Google Pay app. According to a survey by Research and Markets, Google Pay users are expected to expand at double-digit rates, catching up to Samsung Pay in terms of contactless payment users by 2020.
What’s the future holds? Can Apple & Google Become a Bank One Day?
Though the fintech revolution has unbundled fundamental banking services, making them more accessible to low-income people and rural regions, it will be impossible for businesses like Apple and Google to dethrone traditional banks, much alone merge into one. Despite their financial resources, the path to delivering fundamental banking services is plagued with several regulatory difficulties that may prove too great a hurdle for these firms to overcome.
To begin with, the digital businesses lack credit history, which is a vital component for sophisticated underwriting choices in order for a mature lending platform to emerge. Furthermore, to become lenders, digital businesses need the trust and maturity of banks. There is a lot of smoke around data privacy. Many industry observers believe their entry into fintech is motivated by the prospect of data gathering.
However, the looming cloud of antitrust cases and impending congressional oversight may derail their plans to become banks. If this continues to gather momentum, companies such as Google may be broken up into smaller parts making it difficult to become banks.
Furthermore, banks are not sitting back and watching as internet businesses overtake them. The Bank for International Settlements has expressed alarm about Big Tech’s arrival (BIS). A more holistic approach to financial regulation, competition policy, and data privacy legislation has been advocated. Big tech’s charge in finance, which has gone beyond regulatory boundaries, has necessitated the need for mechanisms among authorities and policymakers – national and international – to expand the scope of regulation and control financial risks, according to a report titled Big Tech in Finance: Opportunities and Risks.
Apple and Google becoming banks in the future would be a titanic feat. Banks and tech companies can produce more tailored solutions by collaborating with banks and financial service providers and pooling data.
Tech companies may have made significant inroads into fintech through strategic acquisitions and partnering with traditional banks. However, the quest to offering full banking services seems to be a futile attempt. A huge shadow of regulation hangs over tech companies. There is a lot of mistrust from the people and government alike on what they would do with consumers data. They are also not equipped to provide core banking services such as underwriting which many be complex for these tech companies. These factors put tech companies two steps behind in turning into full time banks