Banks under threat

The encroaching of the large technology companies on the banks has been a slow but sure trend over the past few years.

At the end of December last year, Google was granted an e-money licence from the EU and authorised as a payment institution in the Republic of Ireland. The company will now be allowed to issue and acquire payments across the European Union under passporting rights. Whilst Google currently only offers limited financial services with its Google Pay digital wallet, it can now expand on its financial service offerings.

Many of the large technology companies such as Apple, Google and Amazon have been attempting to expand into financial services over the past few years. There are signs that Amazon in particular is interested in taking on the banks by setting up as a bank.

We are now very familiar with the use of services such as Apple Pay and the use of mobile payments is creeping ever more into every aspect of our lives. This advance is far broader than just internet shopping and much more intrinsic to day to day practices. Entwined with our usage and increasing dependence on smartphones, mobile payments are developing into an essential aspect of our lives.

It could be argued that the success of contactless has helped this progression, blurring the lines and between traditional and digital payments and aiding acceptance by the general public.

The traditional banking organisations are struggling to keep up with the flexibility of the new fintech digital banks and their mobile technology. With large and unwieldy systems (increasingly more prone to unreliability) they are unable to launch products quickly in response to market demands. The market which they once completely dominated is being threatened more and more by new entrants to the market. The closure of bank branches has become familiar news over the past couple of years and is likely to continue.

However, it is not only the new fintech banks which the traditional banks have to contend with, but also the expansion of role and services offered by the large technology companies such as Google and Amazon.

Ten years ago the thought of big technology companies being so involved in the payments industry was not particularly palatable. Since then, however, they have made significant inroads into developing their roles and clearly they will be playing an ever more significant role in payments. What will be interesting is how this will pan out in respect of banks, both new and traditional.