GAFA have already set foot in the Finance industry With more than 1 billion users for Facebook and Google, 800M for Apple and 250M for Amazon, the tech giants popularly coined as GAFA (for “Google, Apple, Facebook, and Amazon”) have become the inevitable actors of our digital lives. Since money and finance play a central role in our lives, it was obvious that GAFA would aim to offer financial services to their users:
Google entered the Financial Services world through the payments sector (a $2 trillion market) with Google Wallet.
Apple introduced the world to Apple Pay, in late 2014, and as of today, three-quarters of all contactless payments made in the US come from Apple Pay.
Facebook has added an option in its flagship Messenger app called “Send or Request Money” enables users to manage payments.
Amazon is the ultimate virtual supermarket, creating a platform offering transactions between suppliers and customers, thus showing that handling payments and money is a part of their DNA and Financial Services is a clear opportunity waiting at the door. Amazon Loans is a great example of their lending initiative.
Other noteworthy examples in Asia include Alibaba or TenCent that have brought major FinTech disruption, setting up an entire ecosystem offering online or mobile payments, personal lending, banking products, savings products, P2P lending, and other Financial Services. The financial arm of Alibaba called Ant Financial is currently valued at more than $50B.
Despite their advent into Financial Services, GAFA don’t aim at becoming banks We expect that these forward-looking, fast-moving and customer-oriented companies will leave the core banking business aside and move step by step into specific financial activities with volume, good margins and network effect such as Payments and Lending:
Payments: The successful examples of Google Wallet, Apple Pay, etc. and the inclination of the Millennials on these new methods is proof that the future belongs here. GAFA is well-positioned to attack this segment, as they excel at eliminating inefficiencies and providing a seamless experience, leaving traditional banks to only become the processor of these transactions.
Lending and similar products: as seen in the example of Amazon Lending, GAFA and the likes won’t shy away from offering such products on their platform. In most of these situations, GAFA won’t provide the loan to consumers and rather offer a seamless interface between the consumer and a pool of originators. Amazon and Alibaba have an entire ecosystem of consumers and suppliers across the globe, which means that handling money in every form is in their DNA and an extension into financial services is a natural extension for them.
Once the GAFA master the payments and the lending world, they could move a step beyond and leverage the customer information to create new customer value in Financial Services. Using mapping data from Google, iTunes information from Apple, social media content from Facebook and customer choices from Amazon, this vast customer insight could lead to highly personalized financial advice and solutions. In this scenario, the banks/credit unions would still act as providers of credit or debit card accounts but the customer’s life insights would be owned by the GAFA.
How banks should react to the threat? In order not to be regarded as mere back-office utilities and to avoid a death by a thousand cuts, banks should leverage their strengths to lead the digital transformation of the Finance industry. To better arm themselves against the above-mentioned threats, Financial Institutions should aim to:
Own the customer relationship: differentiate on experience design by creating more engaging (fast, simple and affordable), personalized and seamless experience for the connected users (anything, anywhere, anytime).
Leverage data analytics: extract insights from the massive amount of structured & unstructured customer data with advanced data science (NLP, deep learning, cognitive computing). The customer financial information can be leveraged to create market intelligence and to generate new revenues.
Create an ecosystem: banks could leverage the power of platforms in open environments to create new ecosystems (hosting of external services and/or white-labelling of banking services through APIs) and new partnership models (with innovative startups or even the GAFA!).
To discuss your point of view on the above, e-mail us, we would be happy to have your insight.
Happy Reading! The CH&Co. Editorial team
The Latest on GAFA making way in to Financial Services
AXA: “Our competitors of tomorrow are Amazon, Apple or Facebook”, says Thomas Buberl, the new AXA CEO AXA’s new CEO believes that Apple and others could move into the insurance industry tomorrow and warns that traditional insurers must learn from and how to work together with new players to improve current offerings and avoid being relegated to risk carriers here (article in French)
Alibaba partners with AXA to sell insurance products and more weight to its platform Taobao.com AXA insurance policies will be available via two methods (i) on the B2B platforms for SMEs and (ii) through Ant Financial for Chinese consumers looking to buy travel insurance for their 120 million annual overseas trips here
Apple Pay now in France with four banks including Banque Populaire, Carrefour Banque, Caisse d’Epargne Ticket Restaurant Through a partnership with four French banks, Apple Pay’s entrance into the French market lets customers pay with their Apple devices (iPhones, Apple Watch, iPad Pro and iPad Mini) which are connected with their Visa or Mastercard credit or debit cards here
Facebook Messenger users can now pay their bills via chatbot BillHero American-based BillHero allows users to pay any bill from any bank account, debit card or credit card through Facebook Messenger. The chatbot aims to simplify and speed up bill-paying for users who are on the go here
Bank customers in Singapore can soon exchange payments via Facebook and Twitter From the beginning of 2017, customers of 20 Singaporean banks will be able to transfer money using their Facebook or Twitter account instead of entering their bank details. Mobile phone numbers will serve as a proxy for bank account details. The trial, due to begin in the first quarter of 2017, is integrated into Singapore’s internal fund transfer system, Fast here
Google’s Android Pay now in Australia with ANZ Bank ANZ became the first of Australia’s ‘Big Four’ banks to roll out Android Pay to users. Five other banks also offer Android Pay with four to follow in the coming weeks. Despite fears about fraud and security, tokenisation ensures card information is kept secure here
A group of Australian banks have come together to challenge Apple Pay services Australian banks are unhappy with Apple and have filed an application for negotiation as they are unable to offer a rival service to Apple Pay as Apple disallows third party digital payments on iOS devices here
Dutch bank Rabobank will build an online P2P platform linking private banking customers with SMEs In a bid to boost SME-financing, Rabobank is trialling a peer to peer lending platform between its private banking customers and its SME business customers. During the trial, Rabobank will provide 50% of loans to its business customers with the rest from private banking customers who may choose which loan they wish to co-finance here
Online retailer Amazon has partnered with San Francisco lender Wells Fargo & Co. to offer interest-rate discounts to select Amazon shoppers In an increasingly competitive student loan market, student Amazon Prime users will benefit from a discount of half a percentage point on student loans (for attending college or refinancing existing loans) from Wells Fargo. To date, the partnership is the first of its kind here
Despite tough Chinese banking regulation, MYBank, a financial affiliate of Alibaba, has began limited online bank operations Internet giant Alibaba is pushing beyond e-commerce through MYBank by offering loans of up to 5 million yuan to consumers and businesses, an area that has been previously underserved by Chinese banks. Regulatory hurdles currently prevent MYBank from offering online current accounts, which is currently forbidden due to strict laws on identity and background checks here
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Chappuis Halder & Co. is a consulting firm specialized in Financial Services with offices in North America, Europe and Asia. We help our clients in several industries, Corporate & Investment Banking, Commodity Trading, Insurance and Retail & Private Banking, with a permanent focus on expertise and research, especially in the Digital area.
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