More and more technology companies are entering the financial world with new payment services. For the traditional banks it is important to watch out.
New provisions in the Payment Services Directive PSD2 mean that third-party providers can use banks’ customer data and infrastructure. This has paved the way for a number of new players to enter the financial world and challenge the traditional banks.
Above all, the global technology companies have jumped on the train. A development we probably only saw the beginning of, experts say.
The classic banks and financial systems that exist today are incredibly complex, but with the new directive the tech giants can take advantage of the existing infrastructure.
PSD2 creates a whole new world of opportunities for new services and business models. It will change a lot and everyone will have to adapt.
Several companies are investing
These are the largest US technology giants Apple, Amazon, Google and Facebook.
All have looked at the financial world and presented different types of payment services.
Why do tech companies want to do this?
In many cases, companies are looking for valuable data.
It is not necessarily that they are looking for financial services to make money from them. Instead, they want to be able to collect data on our consumption and our behavior.
In this way, the companies can see users’ designs, and in turn, easily combine different offers and services.
The companies know incredibly much about the customers. They have spent countless amounts of money to get customers into their products. Why not add services on top of this when you still own a customer.
The advantage of offering financial services is that users stay in the services for a long time and use them daily, as it becomes part of the behavior.
At the same time, it should be remembered that the Swedish market is special. The competitive picture is characterized by a well-developed financial infrastructure with few, but very strong, traditional banks.
Maybe that’s why these services are launching faster in the US where you have a completely different structure. But in the long run, I absolutely believe that all these services will come to Sweden.
In the future, services may be a threat to traditional banks.
Especially when it comes to the younger generation of users, who may not feel an equally strong need to have a personal bank account.
The new generation of users does not have a particularly strong need for the bank to feel like a bank.
There are those who hardly know what a bank is or care about which one you have and find it quite natural to handle banking business through a bigtech company.
In China, development has already taken place, with mobile payment services such as Alipay and Wechat Pay, which tech giants Alibaba and Tencent are behind.
There, some of the financial infrastructure has been skipped. It is probably no wonder if we see this development here as well.
Already today there is a tendency that Swedish bank customers are no longer as loyal to one and the same bank anymore.
I think the image of you having a bank where you go and doing all the cases is disappearing. Tomorrow’s customers have their bank account in one place, make payments in another, and handle the mortgage on a third.
Facts: This is how banks are challenged
75 percent of customers with overall technology know-how use at least one financial product from so-called bigtech companies, ie large tech companies such as Apple, Google, Amazon and Facebook.
Costs, ease of use, and faster service are the main reasons why customers choose financial products from players other than banks.
More than 80 percent of customers who may be switching banks in the next year now use payments, cards and products linked to a bank account from bigtech and other bank challengers.
The report is based on a global survey of 7,900 customers from retail banks in 20 countries and a survey of 50 leading bank managers from 30 markets.
Source: Capgemini’s World Retail Report 2019
Facts: The technology giants’ services
With services like Apple Pay and Google Pay, we can already make payments in physical stores using our phones. But the companies have only taken several steps in recent months to enter the financial world.
In August, Apple launched its own credit card under the name Apple Card, developed by the bank Goldman Sachs. The card is currently only available on the US market.
In November, it became known that Google plans to launch deposit accounts in collaboration with the bank Citigroup. The project, which will offer private bank accounts through the Google Pay app, will be launched next year, according to the Wall Street Journal.
Recently, Facebook rolled out the Facebook Pay service in the US, which allows users to send payments to relatives and friends through Messenger. As long as the recipient has the same currency, the user can send the payments free of charge. In addition, the tech giant is also investing in launching the crypto currency Libra.
The e-commerce giant Amazon announced this year that a new credit card program for customers who have a bad credit profile or completely lack credit history is underway. The company has also previously considered the possibility of launching deposit accounts for its customers.