Bankng your pay slip with Google, financing a product with Amazon or preparing for retirement with Apple. All of these actions no longer seem so surreal or improbable since Mark Zuckerberg's company became licensed in Spain to manage transfers between individuals with Facebook Messenger. First came FinTech firms, now it is the large tech companies. Yet more headaches for banking.
It is a sector that is seeing a move towards a financial world in which a large part of transactions will be done via Facebook, Google or Amazon. "We were expecting it, for two years there has been a rumour in London that Facebook was processing a licence; it is the first step towards the monetisation of Facebook Messenger and Whatsapp," says Philippe Gelis, cofounder of Kantox, the Barcelona company that specialises in currency management and one of the best developed startups in the FinTech ecosystem.
"I am sure that we will soon see Apple, Amazon and Google do the same. The big four will offer the same services because the logic is the same," agrees the dean of the economics faculty at UVic, Xavier Ferràs. They are large platforms that come from different places, but in the end all of them are "large interfaces of users with large economies of scale. Getting more users is really simple for them and does not generate more costs," says Ferràs. They control what gets to the user, about whom they know everything. "If Amazon already uses this for physical products, why wouldn't it also do so with intangible products?" he asks.
The cake of the financial market is a very big one and all the players want a slice; from the traditional banks with the example of imaginBank; traditional payment services like Visa; telephone operators like Orange; and finally mobile telephone operators that control operating systems like Google Wallet or Apple Pay, which make transactions easier. "It is logical that Facebook should take advantage of its network of contacts to add a layer of FinTech services," says Oriol Juncosa, Managing Partner at Encomenda Smart Capital and an investor in FinTech companies.
There is no turning back. Facebook has taken the first steps towards the world of financial services but it is not the only one. In fact, if you are an Uber driver, you can open a bank account and get a credit card through the platform that operates as a collaborative transport service, thanks to a partnership between the platform and a bank. "It realised that 30% of its drivers in the United States had no bank account and so it decided to create the service. What will be next? Uber will end up financing its drivers' cars," warns Gelis.
More users and closer
How can financial organisations compete with a company that has 1.6 billion users all over the world? According to the Kantox cofounder, "a bank is nothing more than a data company and tech companies have much more, more financial power, they are more global, young people adore them and regulation is not a barrier to entry."
Above all Ferràs highlights "intelligence. If someone asks for a loan from Facebook, it knows their psychological profile from the start," he says. Moreover, "if there is an error, they correct the algorithms and do not make the mistake again." At the same time, he adds, "they have the intelligence of a global network. They allow you to put your money in the most efficient place in the world at any time."
"I am the first who would have no problem opening a bank account with Google, with a Mastercard; I trust more in the financial strength of Google than that of a bank," argues Gelis. However, finances for experts, in other words, complex financial products for companies and relations between financial markets will continue to be the territory of corporate banking. "Facebook will not give Endesa a loan of 500 million," he points out.
A new era
For the dean of economics at UVic, the key is understanding that "a great new channel is emerging: the digital platform." He gives the example of opening "a huge motorway on which circulates a whole series of financial products that until now used other roads." If Facebook is a huge motorway, so are the other three giants. "They have a very high capacity for capturing the data of consumers and use algorithms of artificial intelligence that no one else has. With these two assets the new platforms have, the others will have to at least make room," argues Ferràs. In the end, "what is better than a computer algorithm to decide your investments? If you add the fact that they know everything about you, it is unbeatable," he says.
And everything through a leading player: the mobile. "It could become a new banking channel. In Africa, mobile penetration in many areas is higher than that of toilets," says Ferràs. The large tech platforms "can offer new service models to people who cannot move around or who are in difficult places. They have everything they need to conquer the world," he insists.
Thus Ferràs argues that we are facing a "change of paradigm". He points out that normally "the insiders, the people within a sector, are incapable of seeing their future. People appear with other capacities that allow them to offer new things unimaginable to the insiders. These are the ones reinventing the future." If FinTech firms took advantage of current inefficiencies in the sector to combat them with technology, Facebook, Google, Amazon or Apple can become the protagonists of a new way of operating in finance.
A broken model
It is the entry of new players who are causing the value chain of banking to break up. "You have debt suppliers, companies devoted only to making payments, others that only do international transfers... In other words, before you had a bank that did everything, now you have diferents players that do specific activities in a very efficient way. Traditional banking cannot compete with all the specialised players," argues Juncosa, who adds that "the banking sector has restructured but has not reinvented itself; banks clearly have to continue innovating."
Gelis insists that the banks will not disappear but that in 20 years perhaps "50% of the activities related to finance for private individuals will be done by banking and the other 50% through large tech companies, and other FinTech startups." Thus, there are financial organisations that are embracing FinTech firms. "We talk about coopetition, if we work together, both end up winning; the FinTech firm that works with a bank has quick access to millions of clients, and a bank can access valuable technology for its clients' needs," argues the Kantox cofounder.
But what do financial organisations have that the others don't? "The face-to-face experience; banks have to devote themselves to providing a service with added value, they have to be more flexible and must personalise their products; they have a core product that is very difficult to provide without an intermediary, which is savings accounts," says the FinTech investor. According to Juncosa, "there will be banks that will end up winning and others that will lose the battle, in the end perhaps we will have to change the definition of a bank to include all the new players."
It is a sector that is seeing a move towards a financial world in which a large part of transactions will be done via Facebook, Google or Amazon. "We were expecting it, for two years there has been a rumour in London that Facebook was processing a licence; it is the first step towards the monetisation of Facebook Messenger and Whatsapp," says Philippe Gelis, cofounder of Kantox, the Barcelona company that specialises in currency management and one of the best developed startups in the FinTech ecosystem.
"I am sure that we will soon see Apple, Amazon and Google do the same. The big four will offer the same services because the logic is the same," agrees the dean of the economics faculty at UVic, Xavier Ferràs. They are large platforms that come from different places, but in the end all of them are "large interfaces of users with large economies of scale. Getting more users is really simple for them and does not generate more costs," says Ferràs. They control what gets to the user, about whom they know everything. "If Amazon already uses this for physical products, why wouldn't it also do so with intangible products?" he asks.
The cake of the financial market is a very big one and all the players want a slice; from the traditional banks with the example of imaginBank; traditional payment services like Visa; telephone operators like Orange; and finally mobile telephone operators that control operating systems like Google Wallet or Apple Pay, which make transactions easier. "It is logical that Facebook should take advantage of its network of contacts to add a layer of FinTech services," says Oriol Juncosa, Managing Partner at Encomenda Smart Capital and an investor in FinTech companies.
There is no turning back. Facebook has taken the first steps towards the world of financial services but it is not the only one. In fact, if you are an Uber driver, you can open a bank account and get a credit card through the platform that operates as a collaborative transport service, thanks to a partnership between the platform and a bank. "It realised that 30% of its drivers in the United States had no bank account and so it decided to create the service. What will be next? Uber will end up financing its drivers' cars," warns Gelis.
More users and closer
How can financial organisations compete with a company that has 1.6 billion users all over the world? According to the Kantox cofounder, "a bank is nothing more than a data company and tech companies have much more, more financial power, they are more global, young people adore them and regulation is not a barrier to entry."
Above all Ferràs highlights "intelligence. If someone asks for a loan from Facebook, it knows their psychological profile from the start," he says. Moreover, "if there is an error, they correct the algorithms and do not make the mistake again." At the same time, he adds, "they have the intelligence of a global network. They allow you to put your money in the most efficient place in the world at any time."
"I am the first who would have no problem opening a bank account with Google, with a Mastercard; I trust more in the financial strength of Google than that of a bank," argues Gelis. However, finances for experts, in other words, complex financial products for companies and relations between financial markets will continue to be the territory of corporate banking. "Facebook will not give Endesa a loan of 500 million," he points out.
A new era
For the dean of economics at UVic, the key is understanding that "a great new channel is emerging: the digital platform." He gives the example of opening "a huge motorway on which circulates a whole series of financial products that until now used other roads." If Facebook is a huge motorway, so are the other three giants. "They have a very high capacity for capturing the data of consumers and use algorithms of artificial intelligence that no one else has. With these two assets the new platforms have, the others will have to at least make room," argues Ferràs. In the end, "what is better than a computer algorithm to decide your investments? If you add the fact that they know everything about you, it is unbeatable," he says.
And everything through a leading player: the mobile. "It could become a new banking channel. In Africa, mobile penetration in many areas is higher than that of toilets," says Ferràs. The large tech platforms "can offer new service models to people who cannot move around or who are in difficult places. They have everything they need to conquer the world," he insists.
Thus Ferràs argues that we are facing a "change of paradigm". He points out that normally "the insiders, the people within a sector, are incapable of seeing their future. People appear with other capacities that allow them to offer new things unimaginable to the insiders. These are the ones reinventing the future." If FinTech firms took advantage of current inefficiencies in the sector to combat them with technology, Facebook, Google, Amazon or Apple can become the protagonists of a new way of operating in finance.
A broken model
It is the entry of new players who are causing the value chain of banking to break up. "You have debt suppliers, companies devoted only to making payments, others that only do international transfers... In other words, before you had a bank that did everything, now you have diferents players that do specific activities in a very efficient way. Traditional banking cannot compete with all the specialised players," argues Juncosa, who adds that "the banking sector has restructured but has not reinvented itself; banks clearly have to continue innovating."
Gelis insists that the banks will not disappear but that in 20 years perhaps "50% of the activities related to finance for private individuals will be done by banking and the other 50% through large tech companies, and other FinTech startups." Thus, there are financial organisations that are embracing FinTech firms. "We talk about coopetition, if we work together, both end up winning; the FinTech firm that works with a bank has quick access to millions of clients, and a bank can access valuable technology for its clients' needs," argues the Kantox cofounder.
But what do financial organisations have that the others don't? "The face-to-face experience; banks have to devote themselves to providing a service with added value, they have to be more flexible and must personalise their products; they have a core product that is very difficult to provide without an intermediary, which is savings accounts," says the FinTech investor. According to Juncosa, "there will be banks that will end up winning and others that will lose the battle, in the end perhaps we will have to change the definition of a bank to include all the new players."
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