# Banks and Big Tech: the promise and the peril Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2020-09-21 Category: BUSINESS Category URL: https://financedigest.com/category/business Meta Title: Big Tech and Banks: Promises and Risks Unveiled Meta Description: Discover how partnerships with Big Tech offer banks new customers, data, and technology, but also pose risks of losing customer relationships. URL: https://financedigest.com/banks-and-big-tech-the-promise-and-the-perilhtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/untitled-design-7-1736838835232-compressed.jpg) _By **Matt Locsin,** Global Head of Innovation,_ [_Publicis Sapient_](http://www.publicissapient.com/) Big name banks and Big Tech have been signing a number of deals in recent years. Google’s venture into digital checking and savings accounts has enlisted Citi and a number of smaller players, such as BBVA and BMO Harris. Apple’s has stepped into consumer credit on the arm of Goldman Sachs, and Amazon is expanding from its commercial lending base into consumer lending with everyday cards issued by Chase and Synchrony. For incumbent financial [services](https://www.financedigest.com/how-advanced-self-service-technologies-are-changing-the-face-of-finance.html "How Advanced Self-Service Technologies are Changing the Face of Finance") players, the convergence of these industries holds real promise but also poses significant strategic risks. Let’s start with the promise. Partnerships with Big Tech grant financial [services firms access to huge numbers of potential new customers](https://www.financedigest.com/how-can-financial-firms-improve-customer-service-after-the-pandemic.html "How Can Financial Firms Improve Customer Service after the Pandemic?"). [Amazon has 112 million Prime members and 2 million Marketplace sellers](https://www.financedigest.com/amazon-introduces-seller-storage-service-to-tackle-supply-chain-woes.html "Amazon introduces seller storage service to tackle supply chain woes") worldwide. Google has 39 million Google [Pay](https://www.financedigest.com/impact-com-closes-2021-with-new-google-pay-integration-150m-in-funding-and-51-increase-in-clients-yoy.html "impact.com closes 2021 with new Google Pay integration, 0M in funding and 51% increase in clients YoY") users, and in a survey, 16% of Millennials and 13% of Gen X-ers said that they would make a Google checking account their primary account. These are not just cold leads; [tech companies](https://www.financedigest.com/analysis-u-s-companies-spend-billions-on-stay-at-home-tech-boding-ill-for-office-properties.html "Analysis-U.S. companies spend billions on stay-at-home tech, boding ill for office properties") know when customers are planning a holiday, shipping kids off to school, or thinking about buying a home. They have the ability to propose the right [product to the right person](https://www.financedigest.com/cosmetic-tubes-market-will-register-4-6-cagr-as-application-grows-in-personal-care-products-packaging.html "Cosmetic Tubes Market will Register 4.6% CAGR as Application Grows in Personal Care Products Packaging") at the right time. [Big Tech partnerships also promise banks access to torrents of data](https://www.financedigest.com/banks-struggle-to-harness-big-data.html "BANKS STRUGGLE TO HARNESS BIG DATA"), new capabilities, and cutting-edge technology. The data that Big Tech holds on customers, their interactions, and their transactions, can transform essential bank operations, such as credit decisioning, pricing [insurance policies](https://www.financedigest.com/what-type-of-life-insurance-policy-is-right-for-me.html "What Type of Life Insurance Policy Is Right For Me?"), or regulatory compliance. And Big Tech brings remarkable capability to the party, such as [cloud services](https://www.financedigest.com/uk-to-examine-cloud-services-dominated-by-amazon-microsoft-and-google.html "UK to examine cloud services dominated by Amazon, Microsoft and Google"), analytics, security solutions, and disaster recovery. Further, Big Tech’s ability to invest and [develop these technologies](https://www.financedigest.com/nano-one-awarded-10-million-from-sustainable-development-technology-canada.html "Nano One Awarded million from Sustainable Development Technology Canada") dwarfs that of incumbent banks; a tie-up provides cost-effective access to the [latest kit](https://www.financedigest.com/global-animal-pregnancy-test-kits-market-2021-swot-analysis-drivers-restraints-growing-opportunities-latest-trends-applications-and-forecast-to-2028.html "Global Animal Pregnancy Test Kits Market 2021 SWOT Analysis, Drivers, Restraints, Growing Opportunities, Latest Trends, Applications And Forecast To 2028"). _Finally, a partnership with [Big Tech](https://www.financedigest.com/startups-spring-from-ashes-of-big-tech-purge.html "Startups spring from ashes of Big Tech purge") offers banks’ brands a shot in the arm. Even before the 2008 financial crisis, banks’ reputations were in decline; since then, reputational [recovery has been slow](https://www.financedigest.com/wh-smith-warns-on-2022-profit-due-to-slow-travel-recovery.html "WH Smith warns on 2022 profit due to slow travel recovery"). To reverse the damage and step up their brand game, Incumbent [banks could leverage lessons in customer experience](https://www.financedigest.com/the-next-generation-of-customer-experience-in-banking.html "The next generation of customer experience in banking") from a big tech partner._ Each of these benefits come with a corresponding [risk and incumbent banks](https://www.financedigest.com/bank-of-england-says-it-will-unwind-bond-market-intervention-once-risks-have-subsided.html "Bank of England says it will unwind bond market intervention once risks have subsided") ignore them (wilfully or otherwise) at their peril. **The great cut-in** Big Tech is far more likely to end up owning the customer relationship than its financial services partners. Google’s digital checking account would see the company provide the front-end, [customer experience](https://www.financedigest.com/getting-customer-experience-right-in-financial-services.html "Getting customer experience right in financial services"), and mine financial insights as the backbone of personalised advice. This is not just Big Tech playing to its strengths, owning and controlling the customer experience is central to their platform [business models](https://www.financedigest.com/apis-open-banking-and-new-business-models.html "APIs, Open Banking and New Business Models"). ![Matt Locsin](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/mattlocsinpublicissapient7jan2020cbronacmcneillhr-1736838835013-compressed.jpg) Matt Locsin Most [banks still think of themselves as having a direct and meaningful relationship with their customers; it is the basis upon which they offer prudent advice and personalised service](https://www.financedigest.com/why-poor-customer-communication-is-holding-open-banking-back.html "Why poor customer communication is holding open banking back"). Indeed, many depend on it as a means to cross-sell products and maximise lifetime [customer value](https://www.financedigest.com/cracking-the-code-of-customers-future-value-in-retail.html "Cracking the code of customers’ future value in retail"). Further, if a Big Tech partner were to develop aggregation or payment initiation services, this could further [weaken banks’ stability and lead to an increased cost](https://www.financedigest.com/asias-factory-activity-weakens-on-global-slowdown-cost-pressures.html "Asia’s factory activity weakens on global slowdown, cost pressures") of funds. If banks are not careful, they could find themselves becoming the anonymous financial plumbing of e-commerce, mobility, media, and other industries. **Keeping up with the GAFAs** Though Big Tech can grant incumbent banks access to new data, capability, and technology, banks need to be able to use these things effectively in order to keep pace with their partners. As noted, customer experience matters, and Big Tech is not likely to tolerate any [risk of disruption](https://www.financedigest.com/risk-management-redefined-navigating-post-covid-disruption.html "Risk Management redefined: navigating post-COVID disruption") or increasing friction from the operational deficiencies of their partners. If credit decisions are not snappy, [account opening](https://www.financedigest.com/how-accountants-can-improve-financial-planning-and-results-through-open-banking-to-help-smes.html "How accountants can improve financial planning and results through Open Banking to help SMEs") isn’t a breeze, or if payments take too long to settle, would-be partners are likely to be binned. **Friend today, competitor tomorrow** Some of [Big Tech’s moves into financial services, beyond partnerships, are outright competitive, targeting lucrative financial product categories or launching products central to Big Tech’s core businesses](https://www.financedigest.com/how-china-became-big-business-for-twitter-from-blocking-to-blue-checks.html "How China became big business for Twitter, from blocking to blue checks"). These moves started years ago with payments, where e-commerce players [created products](https://www.financedigest.com/creating-a-positive-and-productive-culture-within-the-workplace.html "Creating a Positive and Productive Culture Within the Workplace") to facilitate trust between sellers and buyers online. The use of mobile payments has grown briskly since. In China, mobile payments account for 16% of GDP, thanks to players like Alibaba’s Alipay and Tencent’s Tenpay. Amazon has steadily moved into financial products necessary to increase [users and transactions on its core platform](https://www.financedigest.com/brics-aerial-work-platforms-market-competitive-growth-strategies-based-on-type-applications-end-user-and-region.html "BRICS Aerial Work Platforms Market Competitive Growth Strategies Based on Type, Applications, End User and Region"). Payments are a given (Amazon Pay) but it also offers [credit through Amazon Lending and insurance](https://www.financedigest.com/why-is-trade-credit-insurance-important.html "Why is Trade Credit Insurance Important?") (Amazon Protect). And Uber and Lyft are fighting to attract and retain drivers with mobile payments, [bank accounts](https://www.financedigest.com/community-fintech-11onze-to-launch-el-canut-a-super-app-offering-universal-banking-accounts-and-digital-debit-cards.html "Community fintech 11Onze to launch – EL CANUT – a super APP offering universal banking accounts and digital debit cards"), and credit —products that make working with these ride-hailing giants ostensibly easier. Few observers or analysts believe that Big Tech wants to subsume banking outright. The cost of compliance and the complexity of operating in a [regulated industry](https://www.financedigest.com/strict-regulations-regarding-hygiene-at-industrial-workplaces-to-create-high-demand-for-industrial-dispensers-persistence-market-research.html "Strict Regulations Regarding Hygiene at Industrial Workplaces to Create High Demand for Industrial Dispensers: Persistence Market Research") are enough of a turn-off. But there is little to [stop Big Tech from cherry-picking the products](https://www.financedigest.com/carlsbergs-poland-unit-could-stop-production-lack-of-co2-threatens-food-industry.html "Carlsberg’s Poland unit could stop production; lack of CO2 threatens food industry") and services that matter to them or their customers. Indeed, the rise of Banking-As-A-Service is making the aggregation of essential infrastructure remarkably easy. So, where [banks and technology companies today](https://www.financedigest.com/stress-testing-why-did-my-bank-go-bust-today.html "STRESS-TESTING – WHY DID MY BANK GO BUST TODAY? ") find common cause, could become tomorrow’s battlegrounds. Whether to partner with Big Tech and how are serious decisions for [leaders of incumbent banks](https://www.financedigest.com/digital-trends-for-banking-leaders-looking-to-compete-in-2022.html "Digital trends for banking leaders looking to compete in 2022"). With the benefits of doing so immediately clear, many [big banks](https://www.financedigest.com/big-bank-ceos-to-sell-lawmakers-on-relief-diversity-efforts-amid-economic-regulatory-challenges.html "Big bank CEOs to sell lawmakers on relief, diversity efforts amid economic, regulatory challenges") have already jumped in. But beneath the surface lie a number of rocky issues. If banks can [navigate the risks](https://www.financedigest.com/navigating-risk-in-the-cryptoverse.html "Navigating Risk in the Cryptoverse"), it could be the beginning of a beautiful friendship. --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---