Digital Tentacles: Feels Good, Squishy Yet Firm

December 11, 2019

The large tech companies are insinuating themselves into every field imaginable; this time, it is financial services. South Africa’s Daily Maverick considers, “Google and Facebook Want your Bank Account. What Could Possibly Go Wrong?” Ever eager to capitalize on revenue streams and data streams alike, big tech sees the financial services field as a wealth of opportunity. Reporter Tim Cohen summarizes what we know about each major tech company’s plans so far:

“In November 2019, Alphabet, Google’s owner, became the latest tech company to announce it would enter the financial services space, saying it would launch actual, formal bank accounts. But its announcement had an interesting little twist; it would not be doing so alone, but in conjunction with one of the big US banks, Citigroup, and even more bizarrely a tiny bank, the Stanford Federal Credit Union. Facebook’s approach has been very different and much more ambitious; a whole new currency, Libra, which has been the subject of much controversy. But less well known is that Facebook has upgraded its existing payments system, and it’s become clear that if Libra fails for regulatory reasons, the fallback is to build out a payments system. Apple’s approach is different again — more or less. It released earlier this year a credit card in association with credit card provider Mastercard and US bank Goldman Sachs. The card has some tech features, like being both virtual and physical, and uses the existing Apple Pay system. Amazon, meanwhile, has been considering its options, hiring banking experts, and it is also expected to make some kind of foray into the financial services sphere.”

The article posits a reason this is happening now—these companies are seeing a leveling-off of profits from their traditional activities. Last year Google, for example, saw its slowest ad-revenue growth since the 2008 recession. Also, Facebook’s share price is about what it was two years ago. Cohen wonders, though, whether it will be as easy as they think; banking in many countries is complicated and/ or dominated by the state. Perhaps they are setting themselves up for disappointment. We shall see.

Cynthia Murrell, December 11, 2019

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