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GAFA in Banking. Will They or Won’t They?

There has been a lot written over the past few years about the so-called impact that GAFA (Google, Apple, Facebook & Amazon) will have on banking world in the future. These large tech companies are so intertwined with our lives that it stands to reason that they should look at making a play into banking. Moreover, they have invested significant amounts of money themselves into financial services, typically focused on payments, mobile wallets etc.

The challenges and opportunities

With the advent of Open Banking upon us given what has transpired in Europe with PSD2, it may not seem so far fetched after all. The whole premise of Open Banking is to designed to encourage collaboration, innovation and most importantly, competition in the marketplace. Could GAFA realistically be the ones to build upon the opportunities that PSD2 has to offer? Could they ultimately cause the mass disruption in the industry that many have talked about now for a while?

There was talk that they would look into applying for banking licences enabling them to become a bank in their own right but that never materialised. PSD2 in Europe certainly presents an opportunity for these tech behemoths to really start to look at what they can bring to the party, along with other players looking to gain an advantage. It would certainly make sense for GAFA to offer tailored financial services products based on their users as alternative service offering to the banking world.

It would seem Amazon are likely to make the first move here, certainly it would appear they have already begun the process according to a recent article in the Wall Street Journal

What’s happening now?

Today GAFA have started to really make a play into financial services generally, Facebook have already implemented P2P payments into their messenger app, Apple will allow their users to send money to each other using iMessage. Amazon have even delved into the SME lending space, a key FinTech area which is gaining a lot of momentum across different regions presently.

The rise of FinTech has really emphasised the focus on the consumer, so much so, that customer and user experience are at the forefront. The digital consumer today has grown up in a world which demands more from their service providers, one which can understand their needs and wants and present them with the services they desire. GAFA has a distinct advantage when it comes to consumer engagement, in fact they’re the masters that other industries want to try and learn from. The banking world certainly needs to take note of how GAFA interacts with its consumers and learn to really understand the data they hold on their consumers to provide better engagement models.

It starts from the very beginning of the consumer journey, removing the friction that exists when someone tries to sign up for a new product, on-boarding, KYC and the registration process in general. It doesn’t stop there either, interaction with a consumer once they’re on-boarded is the key – how do you do this? You learn to build a profile on your consumer through the data you hold.

The Future

I am pretty lousy at making predications if truth be told but I would wager that GAFA will make some form of play into the banking world. They’re unlikely to become a fully fledged bank but I believe they will offer tailored services based on their users and through partnerships with other financial institutions. Then again I could be completely wrong, but I am pretty confident that this is how it will play out.

 

Comments: (2)

Kim Engman
Kim Engman - Tieto Financial Consultancy - Copenhagen 25 April, 2018, 10:321 like 1 like

Actually, I'd like to broaden GAFA to extend to: GAFAMATS (Google, Apple, Facebook, Amazon, Microsoft, Alipay, Tencent, Samsung). All are active in the PSD2 region, and all are likely to seek FSA authorization (which is needed to reap the benefits of PSD2 as  AISP or PISP). I'm positive that some of them already are working on this approval in Ireland (where most of them reside due to their poor business taxation, etc.)

Kunal Patel
Kunal Patel - GLG (Gerson Lehrman Group) - London, United Kingdom 25 April, 2018, 12:49Be the first to give this comment the thumbs up 0 likes Good shout Kim and equally relevant too.
Kunal Patel

Kunal Patel

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Open Banking

Open Banking regulation, innovation and technology and it's potential to revolutionise the Financial Services Industry.


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