Tech companies and the money foray

The growing indispensability of technology companies in the financial industry

Global technology giant Google announced that it is entering the banking industry in collaboration with six partner banks to offer current accounts to US-based customers. The impressive list of banks were Citigroup, Stanford Federal Credit Union, Bank Mobile, BBVA USA, BMO Harris, Coastal Community Bank, First Independence Bank and SEFCU. 

Google isn’t the first tech company to enter the banking industry. Apple, Facebook, Uber and many other tech-based companies have already launched, or are in plans of launching their own payment systems and currencies. 

Google widens competition in FinTech

Why are tech companies so bent on introducing their customers to internal payment structures? Aren’t existing systems not good enough? During a press meet on Facebook’s planned currency Libra, the company’s CEO Mark Zuckerberg said, “I view the financial infrastructure in the US as outdated,” and expressed his desire to improve the game. 

Credit cards and UPI systems, when they were first unveiled, were viewed as the herald of a fantastic future. But in 2020, with the COVID-19 lockdown and with the pace of technology going faster every second, even modern technology seems outdated. The FinTech industry thrives on going that extra mile by adding newer possibilities in every sphere of economic activity. And the way to get there is data. 

Companies such as Google are eyeing to capitalize on their strong hold over customer data. With unprecedented depth and coverage of data about consumers’ activities and preferences, companies such as Google are becoming indispensable to the BFSI (banking, financial services, and insurance) industry.

The cryptocurrency saga: With great power comes great responsibility

Facebook’s proposed cryptocurrency Libra faced intense criticism from governments, stakeholders, and customers around the world. A company that has raised flags about privacy leaks and due to its iron hold over user’s data did sound like a formidable giant in the making that should be tamed by regulators. Initially, major network payment processors such as Visa, MasterCard, and PayPal were roped in to play a part of the Libra project, but they dropped out after the scrutiny. 

People feared that a cryptocurrency that was so massive, could have far reaching consequences, and could even potentially destabilize international monetary policy, facilitate money laundering and erode user privacy. Many countries including India are still extremely sceptical about cryptocurrencies, and policy making in that direction is still in its infancy. European countries like Germany and France where data privacy is paramount (remember GDPR?) have even threatened to block Libra completely. 

Despite such negative press, there has indeed been a rising population that has believed in decentralized ledger-based cryptocurrencies. Many genuinely believe that Libra, and other such cryptocurrencies and internal e-payment systems can do a sea og good to the world. Facebook’s member of the Libra board and former PayPal president David Marcus tweeted, “I keep on thinking about all the people and small businesses that could benefit from the Libra Network already being operational — especially now during these times of unprecedented hardship.” during the Covid-19 pandemic.

In response to rising criticisms, Facebook even revamped its plans for Libra, and changed it from a bitcoin-esque venture to be more like PayPal, with a ‘college’ consisting of central banks, regulators, and enforcement agencies from more than 20 countries to ensure regulation.

On the other hand, Google has reached safer shores. 

Instead of introducing its own independent payment systems, Google intends to partner with already established, regulated banks to provide a sense of security to customers. Google executive Caesar Sengupta, in an interview with Wall Street Journal, explained their intentions with the new Google current accounts. “If we can help more people do more stuff (in a digital way) online, it’s good for the internet, and good for us,” Sengupta said. 

Today, Google competes with Apple, which has its own payments system named Apple Pay—a credit card launched in partnership with Goldman Sachs. Apple also faced criticisms of a new kind regarding Apple Pay after its launch. Tech entrepreneur David Heinemeier Hansson tweeted about the difference in the Apple Pay credit limits offered to him and his wife: He had almost 20 times her limit, exposing gender discrimination that seemed to have been hardcoded into their systems. His claim was supported by Apple co-founder Steve Wozniak, who followed with a tweet saying he and his wife faced the same problem too. Apple Pay thus turned negative eyes towards Apple Inc, that accused the technology giant of discrimination and sexism, making people wonder if even algorithms can be biased to a fault.

Is this the future of money?

During the Covid-19-led global lockdown, most humans relied heavily on online services and digital payment methods instead of visiting physical shops and handling cash. Experts say that thanks to the power of FinTech easing our lives during trying times, heavy dependency on such software-enabled financial services has dramatically changed the world. Forever. 

People have started to see the benefits of conducting all their transactions online, and despite the qualms they might have regarding privacy and data leakage, it is very likely that financial technology and data companies are going to see a massive rise in popularity in the coming years. 

The benefits of FinTech are not just for the tech companies, but also for the banks that they partner with. “(Spanish multinational financial services company) BBVA has focused for decades on how it could use digital to advance the financial industry, and in so doing, create more and better opportunities for customers to manage their financial health,” said BBVA USA President and CEO Javier Rodriguez Soler. “Collaborations with companies like Google represent the future of banking,” he added.

Banks have also been trying, for many years, to digitize their functions and popularize mobile and internet banking. Today, with the perfect partnerships made possible by global giants and smaller FinTech companies alike, the time has come for synergistic partnerships to accelerate and change every sphere of the financial sector. With lower costs, faster services, and ease of access, digital payment systems are soon becoming the circulatory system of the world’s economies.