We at C-Innovation specialize in FinTech yet keep an eye on Big Tech. Whilst the difference could be ascribed to size, we see Big Tech as FAMGA (Facebook, Amazon, Microsoft, Google, Apple). Their presence in FinTech is being seen and felt much more, to the point that we have wondered if any boundaries exist anymore. Let's read about it and form our own opinion, shall we?
"BigTech Poses A Greater Threat To Financial Institutions Than Fintech" Mayra Rodriguez Valladares Senior Contributor, Forbes
Big Tech is in financial services. Yes of course we know this, but many people and organisations still hesitate when they try to put the two together. It does not seem natural that a technical organisation should be offering banking and other financial services.
Regulators have been monitoring the situation for many years, yet this intersection of two industries still attracts much attention. The US conglomerate GE offered financial services via GE Bank and GE Finance, for consumers and companies respectively. UK greengrocers Tesco and Sainsbury's offer banking products since 15 years. What's the problem with Big Tech?
The first point to consider is that technology has become so ubiquitous and central to our lives today that many things are interlinked with it. Whereas money has been over centuries arguably the most important linking factor of lives, technology is today's linking factor of information, also known as data.
When finance and banking rely on technology for their operations, then financial information easily gets linked to non-financial information. This creates substantial risks when the same Big Tech companies start to offer their own financial products, risks which may be insufficiently captured by the regulatory approaches in place. Risk is a fundamental consideration for bankers, and the new BigTech bankers are dealing with a much deeper, subtle, and possibly untameable risk environment than classic bankers have ever had to..
Banks were historically self-contained with minimal reliance on service providers, at the most acting together as consortiums on some initiatives such as Visa and Mastercard. This has given way to banks much more interconnected with each other and reliant on technology companies with a worldwide reach. This has much more serious implications when information is hacked, data breaches occur, or service availability is reduced. The worldwide impact of such events might be much bigger than anyone can imagine, and the affected firms unable to control them unless legislation around the world is aligned.