It is not that there is much time to relax in the markets. However, the perhaps excessively dramatized appearance of the technological giants in the banking world may not be as rapid as it has sometimes been predicted. Although the Bank of England has granted Google a license to act as a payment operator in the EU, the intersection between fintech, bigtechy banking still has limits.
Open Banking, is it a real threat?
The progressive implementation since last year of the Second Payments Directive (PSD2) in Europe meant a more “open” form of banking (open banking) through which non-bank operators could access depository entities accounts if clients authorized. A first cross section and deep in the banking business from the technological world. But, at the moment, a cooperation environment has been generated more than an exclusive competition. Much of the change is to come but the tech go through some difficulties that can give air to banks to reposition.
PSD2, another important factor
At the same time as the PSD2 is being implemented, for example, the stringent data protection regulation (GDPR) has also come into force, which puts more pressure on who has gone the furthest in the handling of personal information. So far, it has not been the banks but the bigtech. It is a moment, precisely, in which that market power over the control of information from Facebook, Apple, Amazon, Google and Netflix (Faang) not only irritates critics with the manipulation of information but has awakened, as never before Now, the distrust of the regulators.
And not only in Brussels. Also in Washington. The verification of the capacity for electoral manipulation, the massive thefts of personal accounts of some of the most outstanding technology companies and their social networks and the growing awareness of the value of privacy have contributed to this. Investors are aware that the regulatory scrutiny of the Faang has only just begun. That too, along with other factors, has to do with the loss of 30% of its S & P market value at the end of last year.
Banks and technology
The banks know that, today, the information management technology of the Faang is unsurpassed. They have been regularly criticized that, counting how financial entities count with immense and relevant amounts of information from their clients, they do not take advantage of it as the Faang do. Part of the problem is lack of certain technological cases, but also of greater regulatory pressure and awareness acquired by the experience on the need to preserve privacy.
The playing field may be more balanced than it seems, although the banking service model continues to be subject to a structure change that extends far beyond a post-crisis restructuring. It must also be borne in mind that the stock market punishment on European banks has been excessive in 2018 and if political risk is lowered, 2019 may offer opportunities for the continental banking sector.
Also published on Medium.