Bank of Google? Not exactly. But fintech's future is in Big Tech's ecosystems
(2022/07/05)
- Reference: 1657040411
- News link: https://www.theregister.co.uk/2022/07/05/fintechs_future_lies_with_big/
- Source link:
Comment For all their differences, the biggest tech companies share one thing in common: They don't like to stay in their lane.
In the more than 20 years we've evolved alongside [1]Apple , [2]Google and [3]Amazon , and the slightly less than 20 we've lived with [4]Facebook , each has branched into areas different from their founding purpose.
Cloud services, ecommerce, hardware and advertising have variously cropped up to displace original businesses, and in recent years, the news has shifted to will-they-won't-they discussions of whether big tech is looking to enter the financial services space.
[5]
While you're probably not going to be depositing checks with the Bank of Google, Apple or Amazon anytime soon, that doesn't mean you won't be using their branded services. And unlike the actual players in the banking and finance sphere, big tech can reap the benefits without assuming the risks, say some analysts.
Silicon Valley never wanted in and as it turns out, getting a banking license isn't for faint of heart
Apple has a credit card, as does Amazon. Those two, plus Google and Facebook, offer payment services as well, although without all the mess and regulation of offering checking and savings accounts.
The closest one of the FAANG companies has come to operating a bank was Google's Plex (not the [6]media streamer ), which was a service where it offered checking and savings accounts as well as a physical debit card. The idea was [7]scrapped in October 2021 because of several missed deadlines and the departure of the Google Pay executive leading the project, the Wall Street Journal reported.
[8]
[9]
Just like the other financial services offered by American tech companies, Plex would have relied on partner banks to do the actual financial legwork and risk assumption with Google's role as a mere service provider.
Amazon has [10]reportedly considered offering checking accounts too, but also abandoned it.
[11]
The same can't be said for Chinese and Singaporean tech companies. Alibaba co-founder Jack Ma's Ant Group was awarded a wholesale banking license in Singapore earlier this month, allowing the company to do business with large organizations and other financial institutions.
In 2020, tech company Sea and ride-hailing app Grab, both from Singapore, were awarded digital full bank licenses, allowing them to offer services to consumers.
"In China, big tech companies are the major payment providers," Gartner senior director finance analyst Andrew Steadman tells The Register . Think WeChat and Alipay, Steadman says, who together control more than [12]90 percent of third-party mobile payments in China.
[13]Beijing gives Ant Group the blessing to operate a consumer finance company
[14]Revealed: How to steal money from victims' contactless Apple Pay wallets
[15]An easier way to Flutter? Custom functions improve visual code builder but devs may still be frustrated
[16]Google and Samsung merge their wearable OSes, tease Fitbit baked into the combo
In that situation, it makes perfect sense for Chinese tech companies to seek a banking license - Ma's Ant Group sought one in China [17]last year , and was awarded it, but things [18]haven't gone smoothly .
China and the US simply aren't the same place, and happenings there don't necessarily equate to action on the part of US tech companies, Steadman says. "Does Apple actually want to get a banking license? I honestly don't know. But would it detract from their core business? Probably."
The future of fintech is ecosystems
US banking regulations, like many American legal structures with authority split between state and the federal governments, are complicated. Getting approval to be a licensed bank can take well over a year and cost upwards of a million dollars depending on the license type. Because they're operating throughout the country, tech companies would need nation-wide licenses approved by the Office of the Comptroller of Currency, which [19]can get expensive .
"There's a big investment to be made in money and time. It's not like I can do it next week by throwing a lot of money at it, I need to build out these processes, structures for compliance - all those things," Steadman says.
[20]
"You can also consider how focused regulators are on big tech," Steadman says. "I think regulators would potentially step in and say, I'm sorry, we're not even going to allow this. Not only would they be controlling the banking, but the whole value chain. Governments might not be happy about that."
Consider Amazon: It's one of the largest companies in the world, and in the US alone was responsible for 41 percent of ecommerce sales in 2021, as of October of that year. Not only is Amazon an ecommerce platform, but also offers the widest [21]range of financial services among US tech giants. If any company would be poised to seek a banking license, Amazon would likely be it.
Andreessen Horowitz partner Alex Rampell seems to agree: A [22]CB Insights report on Amazon's financial services ambitions quotes Rampell as describing Amazon as the most likely to try entering into the banking market.
"Amazon is the most formidable. If Amazon can get you lower debt payments or give you a bank account, you'll buy more stuff on Amazon," Rampell said in 2017.
But CB Insights doesn't think Amazon is getting into banking, even saying its findings make it hard to claim so. Like all the other tech companies, CB Insights says of Amazon, "the company remains very focused on building financial services products that support its core strategic goal: Increasing participation in the Amazon ecosystem."
Google, Apple, Facebook and Amazon all control ecosystems which already include ways to pay for products and services - why complicate things when there's plenty of banking partners out there?
When Google Plex was canceled in 2021, a Google spokesperson [23]told Engadget that it was going to focus on digital enablement for banks, rather than selling the services itself. "This is the [24]best way for Google to help consumers gain better access to financial services and to help the financial services ecosystem connect more deeply with their customers in a digital environment," the spokesperson saaid at the time.
Google's statement echoes what Steadman is saying. "Whether it's Apple with their Wallet, or Amazon through its merchant platforms, tech companies have the ability to work with financial institutions to start driving business to them using a different model," he says.
Financial institutions can think of money made through partnerships with tech companies as new revenue streams, Steadman tells The Register , and one that's almost entirely different from ways banks monetized their licenses in the past.
Steadman believes partnerships between financial companies and tech companies is what will actually create value, and he says banks are beginning to realize that. "We'll see more and more relationships between financial institutions and big tech as they figure out what works both ways."
At the end of the day, tech companies want things to be friction-free and simple for their users so they don't leave. Open banking mechanisms, which let third parties like Google access bank data, have been [25]proliferating for years, and are particularly popular in the US, where consumers are [26]more willing to hand over personal information.
"The big theme is about embedding the financial services at the point of consumption," Steadman says. In other words, don't expect Amazon to ask you to open a checking account - tech companies are far more poised to become the front end for your financial institution.
A day may come – soon, even – when banks simply vanish into the background of "everything as a service," becoming another way for your ecosystem of choice to keep you engaged without absorbing risk. ®
Get our [27]Tech Resources
[1] https://www.theregister.com/2019/01/25/the_apple_mac_at_35/
[2] https://www.theregister.com/1999/10/07/microsofts_satanic_majesty_requests/
[3] https://www.theregister.com/1998/11/06/amazon_set_to_sell_software/
[4] https://www.theregister.com/2006/09/07/facebook_update_controversy/
[5] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/personaltech&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2YsS0gffgFka1DRNJrTXzzAAAAEg&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[6] https://www.theregister.com/2018/09/11/plex_cloud_service/
[7] https://www.wsj.com/articles/google-is-scrapping-its-plan-to-offer-bank-accounts-to-users-11633104001?mod=hp_lead_pos4
[8] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/personaltech&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44YsS0gffgFka1DRNJrTXzzAAAAEg&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[9] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/personaltech&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33YsS0gffgFka1DRNJrTXzzAAAAEg&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[10] https://www.forbes.com/sites/ronshevlin/2021/06/14/when-will-amazon-offer-a-checking-account/
[11] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/personaltech&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44YsS0gffgFka1DRNJrTXzzAAAAEg&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[12] https://www.statista.com/statistics/323473/china-leading-third-party-mobile-payment-providers/
[13] https://www.theregister.com/2021/06/04/beijing_gives_ant_the_blessing/
[14] https://www.theregister.com/2021/09/30/apple_pay_contactless_visa_fraud/
[15] https://www.theregister.com/2021/09/22/an_easier_way_to_flutter/
[16] https://www.theregister.com/2021/05/19/google_samsung_merge_wearable_oses/
[17] https://www.theregister.com/2021/06/04/beijing_gives_ant_the_blessing/
[18] https://asia.nikkei.com/Business/Finance/China-s-Ant-Group-seeks-new-investors-after-sudden-withdrawal
[19] https://www.occ.gov/news-issuances/bulletins/2021/bulletin-2021-58.html
[20] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/personaltech&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33YsS0gffgFka1DRNJrTXzzAAAAEg&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[21] https://www.bis.org/fsi/fsibriefs12.pdf
[22] https://www.cbinsights.com/research/report/amazon-across-financial-services-fintech/
[23] https://www.engadget.com/rip-google-plex-201026848.html
[24] https://www.forbes.com/sites/ronshevlin/2020/05/11/google-the-next-big-fintech-vendor/
[25] https://www.theregister.com/2016/02/10/consumer_trust_central_to_success_of_uk_initiative_on_open_data_in_banking/
[26] https://www.theregister.com/2022/02/23/americans_willing_data/
[27] https://whitepapers.theregister.com/
In the more than 20 years we've evolved alongside [1]Apple , [2]Google and [3]Amazon , and the slightly less than 20 we've lived with [4]Facebook , each has branched into areas different from their founding purpose.
Cloud services, ecommerce, hardware and advertising have variously cropped up to displace original businesses, and in recent years, the news has shifted to will-they-won't-they discussions of whether big tech is looking to enter the financial services space.
[5]
While you're probably not going to be depositing checks with the Bank of Google, Apple or Amazon anytime soon, that doesn't mean you won't be using their branded services. And unlike the actual players in the banking and finance sphere, big tech can reap the benefits without assuming the risks, say some analysts.
Silicon Valley never wanted in and as it turns out, getting a banking license isn't for faint of heart
Apple has a credit card, as does Amazon. Those two, plus Google and Facebook, offer payment services as well, although without all the mess and regulation of offering checking and savings accounts.
The closest one of the FAANG companies has come to operating a bank was Google's Plex (not the [6]media streamer ), which was a service where it offered checking and savings accounts as well as a physical debit card. The idea was [7]scrapped in October 2021 because of several missed deadlines and the departure of the Google Pay executive leading the project, the Wall Street Journal reported.
[8]
[9]
Just like the other financial services offered by American tech companies, Plex would have relied on partner banks to do the actual financial legwork and risk assumption with Google's role as a mere service provider.
Amazon has [10]reportedly considered offering checking accounts too, but also abandoned it.
[11]
The same can't be said for Chinese and Singaporean tech companies. Alibaba co-founder Jack Ma's Ant Group was awarded a wholesale banking license in Singapore earlier this month, allowing the company to do business with large organizations and other financial institutions.
In 2020, tech company Sea and ride-hailing app Grab, both from Singapore, were awarded digital full bank licenses, allowing them to offer services to consumers.
"In China, big tech companies are the major payment providers," Gartner senior director finance analyst Andrew Steadman tells The Register . Think WeChat and Alipay, Steadman says, who together control more than [12]90 percent of third-party mobile payments in China.
[13]Beijing gives Ant Group the blessing to operate a consumer finance company
[14]Revealed: How to steal money from victims' contactless Apple Pay wallets
[15]An easier way to Flutter? Custom functions improve visual code builder but devs may still be frustrated
[16]Google and Samsung merge their wearable OSes, tease Fitbit baked into the combo
In that situation, it makes perfect sense for Chinese tech companies to seek a banking license - Ma's Ant Group sought one in China [17]last year , and was awarded it, but things [18]haven't gone smoothly .
China and the US simply aren't the same place, and happenings there don't necessarily equate to action on the part of US tech companies, Steadman says. "Does Apple actually want to get a banking license? I honestly don't know. But would it detract from their core business? Probably."
The future of fintech is ecosystems
US banking regulations, like many American legal structures with authority split between state and the federal governments, are complicated. Getting approval to be a licensed bank can take well over a year and cost upwards of a million dollars depending on the license type. Because they're operating throughout the country, tech companies would need nation-wide licenses approved by the Office of the Comptroller of Currency, which [19]can get expensive .
"There's a big investment to be made in money and time. It's not like I can do it next week by throwing a lot of money at it, I need to build out these processes, structures for compliance - all those things," Steadman says.
[20]
"You can also consider how focused regulators are on big tech," Steadman says. "I think regulators would potentially step in and say, I'm sorry, we're not even going to allow this. Not only would they be controlling the banking, but the whole value chain. Governments might not be happy about that."
Consider Amazon: It's one of the largest companies in the world, and in the US alone was responsible for 41 percent of ecommerce sales in 2021, as of October of that year. Not only is Amazon an ecommerce platform, but also offers the widest [21]range of financial services among US tech giants. If any company would be poised to seek a banking license, Amazon would likely be it.
Andreessen Horowitz partner Alex Rampell seems to agree: A [22]CB Insights report on Amazon's financial services ambitions quotes Rampell as describing Amazon as the most likely to try entering into the banking market.
"Amazon is the most formidable. If Amazon can get you lower debt payments or give you a bank account, you'll buy more stuff on Amazon," Rampell said in 2017.
But CB Insights doesn't think Amazon is getting into banking, even saying its findings make it hard to claim so. Like all the other tech companies, CB Insights says of Amazon, "the company remains very focused on building financial services products that support its core strategic goal: Increasing participation in the Amazon ecosystem."
Google, Apple, Facebook and Amazon all control ecosystems which already include ways to pay for products and services - why complicate things when there's plenty of banking partners out there?
When Google Plex was canceled in 2021, a Google spokesperson [23]told Engadget that it was going to focus on digital enablement for banks, rather than selling the services itself. "This is the [24]best way for Google to help consumers gain better access to financial services and to help the financial services ecosystem connect more deeply with their customers in a digital environment," the spokesperson saaid at the time.
Google's statement echoes what Steadman is saying. "Whether it's Apple with their Wallet, or Amazon through its merchant platforms, tech companies have the ability to work with financial institutions to start driving business to them using a different model," he says.
Financial institutions can think of money made through partnerships with tech companies as new revenue streams, Steadman tells The Register , and one that's almost entirely different from ways banks monetized their licenses in the past.
Steadman believes partnerships between financial companies and tech companies is what will actually create value, and he says banks are beginning to realize that. "We'll see more and more relationships between financial institutions and big tech as they figure out what works both ways."
At the end of the day, tech companies want things to be friction-free and simple for their users so they don't leave. Open banking mechanisms, which let third parties like Google access bank data, have been [25]proliferating for years, and are particularly popular in the US, where consumers are [26]more willing to hand over personal information.
"The big theme is about embedding the financial services at the point of consumption," Steadman says. In other words, don't expect Amazon to ask you to open a checking account - tech companies are far more poised to become the front end for your financial institution.
A day may come – soon, even – when banks simply vanish into the background of "everything as a service," becoming another way for your ecosystem of choice to keep you engaged without absorbing risk. ®
Get our [27]Tech Resources
[1] https://www.theregister.com/2019/01/25/the_apple_mac_at_35/
[2] https://www.theregister.com/1999/10/07/microsofts_satanic_majesty_requests/
[3] https://www.theregister.com/1998/11/06/amazon_set_to_sell_software/
[4] https://www.theregister.com/2006/09/07/facebook_update_controversy/
[5] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/personaltech&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2YsS0gffgFka1DRNJrTXzzAAAAEg&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[6] https://www.theregister.com/2018/09/11/plex_cloud_service/
[7] https://www.wsj.com/articles/google-is-scrapping-its-plan-to-offer-bank-accounts-to-users-11633104001?mod=hp_lead_pos4
[8] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/personaltech&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44YsS0gffgFka1DRNJrTXzzAAAAEg&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[9] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/personaltech&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33YsS0gffgFka1DRNJrTXzzAAAAEg&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[10] https://www.forbes.com/sites/ronshevlin/2021/06/14/when-will-amazon-offer-a-checking-account/
[11] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/personaltech&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44YsS0gffgFka1DRNJrTXzzAAAAEg&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[12] https://www.statista.com/statistics/323473/china-leading-third-party-mobile-payment-providers/
[13] https://www.theregister.com/2021/06/04/beijing_gives_ant_the_blessing/
[14] https://www.theregister.com/2021/09/30/apple_pay_contactless_visa_fraud/
[15] https://www.theregister.com/2021/09/22/an_easier_way_to_flutter/
[16] https://www.theregister.com/2021/05/19/google_samsung_merge_wearable_oses/
[17] https://www.theregister.com/2021/06/04/beijing_gives_ant_the_blessing/
[18] https://asia.nikkei.com/Business/Finance/China-s-Ant-Group-seeks-new-investors-after-sudden-withdrawal
[19] https://www.occ.gov/news-issuances/bulletins/2021/bulletin-2021-58.html
[20] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/personaltech&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33YsS0gffgFka1DRNJrTXzzAAAAEg&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[21] https://www.bis.org/fsi/fsibriefs12.pdf
[22] https://www.cbinsights.com/research/report/amazon-across-financial-services-fintech/
[23] https://www.engadget.com/rip-google-plex-201026848.html
[24] https://www.forbes.com/sites/ronshevlin/2020/05/11/google-the-next-big-fintech-vendor/
[25] https://www.theregister.com/2016/02/10/consumer_trust_central_to_success_of_uk_initiative_on_open_data_in_banking/
[26] https://www.theregister.com/2022/02/23/americans_willing_data/
[27] https://whitepapers.theregister.com/
Yes, that is right...
lnLog
'While you're probably not going to be depositing checks with the Bank of Google, Apple or Amazon anytime soon,'
Yes that is right, the USA still uses cheques extensively, although with minimal checks, so are quite weird about sharing direct deposit details.
Re: Yes, that is right...
Stork
How quaint
Regulation
Throatwarbler Mangrove
I suspect the most salient point is the one about regulation. Since 2008, banking concerns, especially large ones, have come under extensive regulatory scrutiny in the US. Also since 2008, many banks have been struggling (in comparison with the big tech companies, anyway), due to a combination of increased regulation, low interest rates, the need to keep adequate capital on hand, and increasingly cut-throat price competition in financial services, especially investments. For a tech company to take on the role of a bank, it would have to submit to drastically-increased regulatory oversight, which I suspect would not be welcome, in order to enter into a much lower-margin business. If faced with that option as a tech CEO, I would probably also go the partnership route rather than trying to form or buy a full-fledged banking concern.
Re: Regulation
Dinanziame
An additional problem is that banking regulations are different in every country . That's fine for players like WeChat and AliPay, since they mostly operate in a single large country; but US tech giants are less likely to be attracted, considering even the US probably represents less than half of their revenue.
Re: Regulation
DS999
It isn't worth it because even if a big tech company wanted to get into banking they would only want to do a little bit of what a real bank does. They wouldn't want to have to handle direct deposits of paychecks, or offer accounts you could write paper checks on, and so forth.
Apple didn't need to be a bank to do Apple Pay and Apple Card and offer iPhone "subscriptions". Why would you want all that extra burden just to have customers expect you to offer a bunch of products and services you don't want to offer?
"In the more than 20 years ...
we've evolved alongside Apple, Google and Amazon, and the slightly less than 20 we've lived with Facebook,"
Well in that time I've learned that I can't trust them with my photos or my personal information, so there is NO WAY I'm going to trust them as a bank. I kind of naively bought into the whole "Don't be Evil" thing around 2000 but I've wised up a little.
As for Andreessen Horowitz, they are all in with NFTs and Web 3, and they also invested in Theranos so you make up your own mind about them.