Big Tech in banking: Not a threat but an opportunity for fintech
By Fernando Zandona, Chief Product and Technology Officer at Mambu
Big Tech making an increasing presence within banking may be viewed by many fintechs as major competition from reputable companies with an unfair advantage.
However, the more Big Tech companies move into the market, the better, for the end customer. These moves push fintechs to be more nimble and efficient, while, in turn, fintechs and neobanks push traditional players to expand their digital offerings in order to remain competitive. This healthy competition is just that, healthy. It drives innovation from both sides, and here’s how.
The current market: neobanks versus incumbents
Our research has found that a third of banks are unable to deploy updated or new products at speed, and with the current war for talent, many banks are struggling to find qualified employees with the skill sets needed to operate the new technology. In addition, over a third don’t have the appropriate systems to support new workforce models. This is why two-fifths of senior executives intend to modernise their platform and plan on doing so through partnering with third-party providers. This can enable established banks – who likely have enough funds – to launch speedboat projects and use this as an opportunity to grow faster.
This is where the ‘Evolvers,’ as cited in the research, race ahead. By working with fintech partners to quickly respond to consumer demand, Evolvers are able to harness cloud-based platforms to deploy flexible financial products and achieve a seamless transition to digital.
Neobanks and fintechs may have the innovation and agility but they lack the expansive customer base of the Big Tech players. In order to survive, they have to react to growing customer demand quite quickly. If you consider the high demand of customers wanting a seamless experience of banking, neobanks need to ensure they regularly launch new products that meet the latest customer trends. To do this, they’ll need to leverage the orchestration of the ecosystem.
Both incumbent banks and neobanks will innovate in similar ways, but their starting points will ultimately be different.
Big Tech, Big moves
On the surface, Big Tech moving into banking may be seen as a huge threat to fintechs as Big Tech is entering the space with strong reputations, large amounts of money, and advanced capabilities on their side. However, Big Tech in banking is really an opportunity for all of us to become better.
The more innovation and disruption in the market, the better the experience for the end customer. Big Tech drives innovation for additional products and offerings, which ultimately make consumers’ financial lives easier. We’ve seen neobanks and fintechs continue to push traditional banks to develop products needed to meet customer demands with offerings such as ‘Buy Now Pay Later’ entering the market, which took the consumer payment space – and is now taking the B2B payment space by storm.
It’s undeniable that Big Tech is redefining financial services and expanding the digital ecosystem, which, in effect, is pushing fintechs to be more nimble and efficient. Apple expanding their range of services around payments gives them access to the data and algorithms for immediate opportunities. It also provides a more general platform for exploiting open banking to obtain financial institutions’ data for future opportunities.
What’s next for Big Tech in banking
If traditional banks want to drive growth and stop their customers from jumping ship, they need to act fast. This is needed now more than ever, with Big Tech players making big moves and highlighting how ripe the market is.
Last year alone we saw Apple continuing to innovate with their ‘tap to pay’ solution for merchants. It won’t be long before we see others taking advantage of the opportunities already sought by big players including Apple, Google and Amazon.
When facing doubts about the future, banks should look to financial ‘Evolvers’ for guidance. By placing the customer experience and progressive mindsets at the core of their business, they have proven that traditional banks can also do the same, and continue to play an important role in modern society.