Last week our theme was “Is this end of Bear market or Bull trap?“
Our theme for this week is “Are Apple, Amazon, Google and Facebook the future of banking?“
Banks started around 2000 BC in Assyria and Sumeria, were merchants, made grain loans to farmers and traders who carried goods between cities. Over time, banking evolved to the highly organized system we currently know. While, everyone thought that the banks of the financial crisis in 2008 were too big to fail, we still had a full-blown worldwide banking crisis, with repercussions still felt today.
Ten years later, everyone is talking about how finance and payments could be disrupted by blockchain and cryptocurrencies. Banks around the world have spent the past few years preparing for competition from small, nimble technology startups. Yet, the big four, Amazon, Google, Facebook and Apple have been working diligently and expanding into payments and other financial services to disrupt one of the last frontiers.
On Feb 28, the New York Times reported that Facebook is ready to launch its own cryptocurrency and is speaking with exchanges about listing the coin. Facebook will be launching a stable coin for WhatsApp. Its expected that the stable coin will become available to Facebook and Instagram users, in the future. Facebook’s stable coin will be pegged to the US dollar and will allow users to send money to other users anywhere, instantly. Between WhatsApp, Messenger and Instagram, Facebook has a combined user based of around 2.8 billion people.
With the new stable coin, Facebook will be going after a multi billion remittance market. Facebook’s move is clearly to counter the threat from rivals, Telegram and Signal. Facebook started its efforts in crypto last year, after Telegram raised with its ICO a record $1.7 billion. Eventually we may see Facebook try to take its coin mainstream, allowing users to spend the cryptocurrency with online stores or on FB pages, without the need to type in credit card or PayPal account details.
Facebook, Google, Amazon and Apple have long tried to break into financial services, with products such as Pay by Messenger and Google Wallet. Amazon has already pushed into loans to small businesses operating on its Marketplace platform, announcing in June 2017 that it had originated a total of $3 billion since a low-key launch in 2011. In 2016, Facebook secured an electronic money license in Ireland.
Rakuten may be launching a cryptocurrency soon. An earning report from February 12 states there is a major update coming next month, mobile app platform Rakuten Pay may potentially start supporting cryptocurrency payments, including all payment solutions embedded into one platform.
The banks you know today might disappear altogether over time. When today’s customers evaluate financial institutions, they compare how easy, instant and seamless the experiences is. With data based services offering personalized solutions and voice-activated Alexa and Google purchasing, the entire experience is changing.
A survey carried out by strategy consultancy Bain found that nearly 60% of bank customers were willing to try a financial product from tech company they already use. Amazon and PayPal were the two brands consumers would most trust with their money, the survey found, ahead of Apple, Google, Microsoft, Facebook and Snapchat.
Big tech players can leverage the open banking opportunity. Open banking brings significant changes to banking. It’s an immense opportunity for fintech startups, and any technology company to make use of open APIs to access customers’ accounts. With open banking, a bank’s competitors have unprecedented access to a bank’s data. This means that when Amazon asks for access to your bank account in return for an extra month of Prime, there’s nothing the bank can do to stop them
As cryptocurrencies and altcoins become more mainstream, we will see big tech companies making them part of their strategy to disrupt the financial industry. Facebook, Google and Amazon might become the banks for the next generation, but it wont happen overnight. Alipay has 400 million users, WeChat’s WeBank is very successful. If done right, this could be great for consumers, as they will gain access to a much wider set of financial products at lower prices. It will also cause a real shock to the most banks’ revenue.
Ilias Louis Hatzis is the Founder & CEO at Mercato Blockchain Corporation AG. He writes the Blockchain Weekly Front Page each Monday.