Big Tech wants to obtain information on people’s payment habits. They have applied for licenses as payment entities in Europe, Mexico, the United States and India.
More than a quarter of all financial institutions are already associating with one or more technology giants and an additional 27% indicate that they plan to forge these types of partnerships within the next 12 months, says a report from the consulting firm KPMG.
At least 53% of all banks intend to have some kind of alliance with American tech companies grouped under the acronym GAFA -Google, Amazon, Facebook, and Apple- or the Asian companies united under the acronym BAT -Baidu, Alibaba and Tencent-.
Some of the questions that everyone asks in this industry is whether someone will be able to get a mortgage from Facebook or a checking account on Google. Time will tell.
The report Tech Giants in Financial Services, prepared by Funcas and KPMG, states that “for now, Big Tech does not seem interested in collecting deposits, but they are just beginning to take their first steps in the financial world.
“They are focusing their activity on specific services that add value to their businesses, such as payment and credit,” says the study.
“At present, the main objective of the big technology companies is to facilitate the purchase to the digital customer and obtain information about their payment habits,” reflects Francisco Uría, partner of the financial sector of KPMG.
To this end, “they have applied for licenses as payment entities in Europe, Mexico, the United States and India,” says Uría, which allows them to open payment accounts with which the clients can withdraw cash; execute payment operations by card and transfer; issue and acquire payment instruments; send money; and open credit lines directly linked to a payment operation whose duration cannot exceed 12 months, among other actions.
Facebook is the most advanced of all. It is already negotiating with Citigroup, Wells Fargo, JP Morgan Chase and US Bancorp to share information about its users.
“With this measure, Facebook intends to access credit card transactions and current account movements so that users can check their balances through their application,” says the report.
Google works on the creation of Google Bank, an online platform, which would add the financial services of banks and financial operators. Amazon has already maintained contacts with JP Morgan and Capital One to offer a service similar to checking accounts.
Amazon also collaborates with Banco Santander, Coinc de Bankinter and with Fintonic, a financial aggregator. Likewise, different banks such as Santander, Bankinter, CaixaBank, Bankia or Sabadell already work with Apple Pay.
Although their rates are high, banks have opted for that platform because their users have a high purchasing power on average and often use technology to make payments. Also, thanks to an agreement with CaixaBank, Telefónica can offer fast loans.
Alliances are taking place by leaps and bounds. Chinese big tech Baidu has created a joint venture with the country’s seventh bank, China Citic, to create an online bank.
While Tencent, the third-largest Chinese big tech, owns 30% of the Webank virtual bank, which offers services to individuals and businesses. Its objective is to transfer the payment business via mobile to the rest of the world.
Alliances are also woven with distribution. Giant retailers signed an agreement with Alipay of the Chinese group Alibaba to make payments in their establishments via mobile. “Soon we will see new movements in this direction,” experts say.
The report states that 47% of customers would be willing to open an account on Google, Amazon or Apple, according to Funcas data. For Francisco Uría, of KPMG, “the emergence of new players can generate regulatory asymmetries, with disadvantages for banking.”
Santiago Carbó, director of studies at Funcas, points out that “regulation is not easy because prohibiting or limiting big tech would limit useful services for the consumer.” Therefore, he adds, “they are considering ways of regulation that, without damaging innovation, can put some precaution on these activities.”
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