Fintech To Be Redefined This Year

Fintech (term that prominently stands for Financial Technology), is likely to get a boisterous boost this year, with prominent tech giants (Google and Facebook) are all set to make deep inroads into the ever expansive financial services industry.

As such, mega tech giants are busy preparing lengthy algorithms to step into the banking sector, but they don’t want to be operational, akin to regular banks. Now, to consolidate the conceptual programming logic concerning finance into practice, Google will help open consumer accounts with the service lever (sharpened like never before) extended by Citibank while such joint efforts will be complemented by Credit Union, based in California.

No matter, their product-offer is far different but both tech groups step back from becoming any regulated financial institution like Citi or Goldman and trash such rumours to be in the mainstream banking service sector. Besides, the other prominent members of global Big Tech clan, i.e. Facebook and Amazon too, aspire to capitalize upon the footsteps and would be call the shots in the global whirlpool of finance sector in the coming months. In words of Sarah Kocianski, who heads research department at Fintech consultancy, 11:FS,”their proliferation into banking sector will be more of a slow creep than big strides“.

She further observed, “The big tech firms will continue to add services that are peripheral to banking to their existing offerings without going full-stack banking. The headache of getting, and maintaining, a banking license would likely be considered too big a risk for these companies. Instead, they will continue to operate with licensed partners. “

Already in Europe, there have emerged a plethora of online banks, from Monzo to N26, which maintain robust focus upon wallets of energetic professionals with a strong tech orientation. In the meantime, mega economies like Singapore and Hong Kong have already taken to processing the granting of digital bank licenses, simply to pave way for a reputed tech groups to unroll financial services smoothly. Kociansky opined that the aforementioned tech giants would find it difficult to act like regulated banks as there are present harsh legal restraints.

The view gained strong support from Accenture’s global payment lead, Sulabh Agarwal, “Do I expect them to become banks? I don’t think so do. I expect them to create new services to enhance their propositions“. The analyst thinks (and rightly so) that the notion of tech giants becoming regular banks, is toothless.

Global Finance Ignites Interest From Other Tech Giants:

In case of Facebook, social media firm simply plans to unveil digital currency which would make global transactions much affordable with underlying promise of tech diligence and alacrity.

Named as Libra, this is a virtual token that would be embedded with multiple currencies and government acknowledged debt, but there are concerns about regulatory hurdles, since autonomy of major world currencies would be submerged.

Even though president Trump has cajoled the firm to secure a federal bank charter first and then to move ahead with the project. But such is a long-drawn process and is marked by a great degree of complications and Fintech players of any scale find it pretty tiresome to apply for and get banking licenses in the U.S. But, on the bright side, Facebook blueprint is potent enough to make major banks chase their money by aggregating a major force comprising professional skills adapted by tech know-how.

Let us also bring Simon Taylor observation here, who is a co-founder and Blockchain lead at 11:FS,” The theory goes that if 2 billion people were to withdraw their deposits from the banking system and move them into Libra tokens, you’d effectively have a run on the banks,”. Facebook is absolutely big enough for that to be plausible, but whether or not it happens depends much more on what consumer problem is being solved”.

Other than Libra, Facebook is also working upon establishing its stream of payment products under a new brand, which is crowned as Facebook Pay. Then, Uber is also quick enough to splash into finance, following in the footsteps of its South Asian competitor Grab. With a division set-up under the service brand Uber Money, there is programmed a digital wallet wherein refined payment cards are being facilitated too. Certainly, there will ensue a stiff competition among such like-centric players such as Google Pay and Apple Pay in U.S. while in yet another booming economy China, Alipay and WeChat Pay have already captured the market.

In such a fabulous scheme of things, Amazon (which is hard to be sidelined) has already wandered a far ahead in the field of business lending, but it is still away from consumer banking. Amazon unraveled a loan scheme for students in 2016 in association with Wells Fargo, but such an effort received a blow, considerable enough to send them packing and Kocianski was quick enough to comment, “every reason to suspect they’ve learned from that”.

Reports floated, however, that the firm was discussing with other reputed businesses like J.P. Morgan, about the likelihood of setting up their own checking accounts but it is still cloudy that any such a perception will ever be a real scenario.

Getting back to Apple, Kocianski is ever hopeful that just like Google, the firm would continue to be a major brand in payment space and as an ancillary to mainstream banking.

Dear readers, as consumers, we all need to keep our fingers crossed, no matter in which part or region we reside in this globalized world, powered by high-octane digitization.