Technology floods everything and there is not a single corner without the internet being present. In fact, the most valuable companies in the world are technological. Amazon, Facebook, Google, Apple … are just some of the giants that move the “electronic threads” of the world. As an example, the latter manages some 3,500 million daily searches, with a world population of over 7,600 million people; the social network brings together 2,200 million active accounts; and the online store is already the company with the highest stock market value in the world, more than 800,000 million dollars. And, now, your goal more than ever is in money; but not in accumulating it, but in managing it.
Google this week received a new license to operate in Ireland (and, therefore, the entire European Union) as payment entity and two weeks ago the same in Lithuania. The authorizations are identical to each other and, in fact, the multinational already had one in the United Kingdom but the Brexit has forced them to move quickly to keep the community market open, as it happens to so many other companies before the threat of their exit from The EU. In this way, the search engine can make transfers, direct debits, manage cards … all as if it were a bank, but not really. A similar or identical situation occurs on Facebook, Apple or Samsung, enabled to operate as payment entities.
Competition = Benefits for clients
“The more companies there are, the greater the competition and they will provide a better service to the client, who will have new services or services but at a lower cost,” says Antonio Herráiz, director of the Digital Banking, Innovation and Financial Technology Program at the Instituto de Stock studies (IEB). This competition on the part of the technology opens a new approach to payments in the banking sector, before which it calls for it to take place under the same conditions. The Spanish Association of Banking (AEB) and the Spanish Confederation of Savings Banks (CECA) celebrate the entry of the so-called «big tech», with conditions. Both employers demand that they have to be subject to the same regulation, supervision, and obligations, for the good of the consumer, because what matters “is what is done, not who does it”, they affirm from the ECSC.
«With the excuse of offering better services they take advantageous positions that can be worrisome and end up dominating the market», says an expert
Juan Abellán, professor of Finance at EAE Business School, emphasizes that technology companies “play in another league”, in reference to the fact that they do not have the level of control or the guarantees of the bank. Against this, considers that “with the excuse of offering better services take advantageous positions that can be worrying and end up dominating the market.”
This concern is highlighted by the two employers of the financial sector, although with nuances. The AEB points out that its entry requires an analysis of competition impact, financial stability and consumer protection to avoid “new forms of concentration and systemic risks”. The CECA, on the other hand, goes further in its offensive: «Google’s main business model is based on the sale of information. If something is good and free, the product is you. Who can Google sell the financial data of a consumer and what can be done with them is something more questionable and that is normal to awaken sensitivities in many customers. Let it be known that I am from a football team, that I like a kind of movies or that I am looking for certain things on the internet is not the same as knowing my financial situation ». In other words, it alerts that the confidence can be broken, more when these companies live on the data of their clients. Facebook, for example, is one of the most worrisome cases due to its policy of selling sensitive user information and the hacks suffered. “It’s a huge risk,” says Abellán, of EAE.
Therefore, the sources consulted claim that it is the legislators who put a stop to the activity of the «big tech». «The way to mitigate risk is within the institutions and regulators. They have to provide the same protection that banks give their clients, “says Herráiz, of IEB. And the same employer makes the same request: that all operators participate, yes, but with the same rules of the game.
The “neo banks”, the real risk for the traditional sector Beyond the “big tech”, experts believe that it will be the “neo-banks” that really face the traditional sector in their business. This is transmitted by Rodrigo García de la Cruz, president of the Spanish Association of Fintech and Insurtech (AEFI). “These will be its competitors, the digital banks for their most efficient proposals,” he says. There are not many offers that are already in the common market. This is the case of the British entity Monzo, the Spanish BNext and the German N26. Precisely the latter has recently achieved a round of financing of 300 million to continue its expansion. It already operates in 24 European markets and manages accounts of 2.3 million customers. Its valuation, in fact, is already in the 2,700 million dollars, thanks to which it has welcomed a new type of client. “There are millions of people around the world who continue to have bad banking experiences and pay high commissions,” says Valentin Stalf, CEO and co-founder of N26. “Its success will accelerate the digital transformation of banking,” says García de la Cruz, while stressing that there is still some distrust, although declining, in betting on the “fintech.”
Reinventing the sector
Enrique Dans, Professor of Innovation at IE Business School, argues that putting barriers to Google, Facebook or Amazon is like trying to cage the beasts. There are no limits, and this expert considers an “obvious” risk that these companies enter the sector. But not for the users but for the financial entities. The reason: that the great technologists have more power and capital than any bank. “Banks will have to reinvent themselves, change their product offer,” says Dans, referring to the fact that the traditional, because obsolete, will no longer be attractive. In addition, they will have to deal with a financial capacity and a philosophy never seen before. “Their fame is that they are able to lose money to solve a customer problem,” says the IE expert. All this linked, even, to the «bad reputation that banks have».
The future is of the “big tech” -said the analysts- and with the passage of time, they will colonize all the strata of the financial sector, although they have never demonstrated that position. Such is the case that Google sources, the last to jump into media noise, point out that they are not interfering in the banking sector … in line with the position that the company has always maintained. They are not and do not want to be competitors of the bank, they say.
The truth is that, despite the position they maintain, they do cover activities related to the financial sector. For now, they are limited to payments (Google Pay, Apple Pay, Samsung Pay, and Facebook Messenger, which has that function) and this is stated in the licenses that each of them has been obtaining over time. For the moment, they stay away from essential services such as loans or deposits, although experts believe that their strategy will not be to enter all areas. «In the future it will be a mixed model. But they will not act in all lines of business; only in those that benefit them the most or those that provide the most information, “Herráiz predicts.
So things, in the latest ranking of competitors in the financial sector prepared by IEB, published in 2017, none of the major companies fell from risk level 7 over 10: Paypal (9), Facebook (8), Google (8), Amazon (7) and Apple (7). «The financial sector is based on data and information and in this field, Google has no rival. It also has talent, technology, and sufficient capital, which, together with a large amount of information from users, could be better than anyone in financial services, “the study said at the time.
45% of traditional financial institutions already have agreements with this type of companies, while 82% of banks trust that these alliances will increase over a period of five years
Precisely, faced with this type of threats, Spanish banks are positioning themselves to be able to offer the most innovative solutions to their clients. From his attitude, that intention to adapt to the environment, to make his position is considered chameleonic.
The main financial firms of our country are clear -according to public broadcasting- that digitization must be a good part of their bet. Each one already has its own mobile application but that is not the most novel aspect of its strategy. None of them bets to confront the “fintech” or these new technological operators but they welcome them. In the face of this, banks are increasingly launching the “fintech” to make the best ideas their own.
According to PwC data, 45% of traditional financial institutions already have agreements with this type of company, while 82% of banks trust that these alliances will increase over a period of five years. And what is more clarifying: they put the danger 24% of their income to start in these societies, which can either work or fail in the attempt.
Generational relief
This also coincides with the generational change in Spanish entities. The Ibex 35 has lowered from 62 to 59 years the average age of its first swords in question just two years, emphasizing relays precisely from the bench.
Banco Santander appointed the new Italian CEO Andrea Orcel (55 years) and BBVA consummated the succession of Francisco González with Carlos Torres (52 years) in the presidency and the Turkish Onur Genç (44 years) as CEO. Thus, the experts consider that these revolutions also obey the need to renovate the domes by younger … and digital personnel, who understand the demands of the present but also of tomorrow. Always to respond effectively to the challenges that will pose, and already do, companies like Google, Facebook or Amazon.