Beyond Digital Wallets: Mastering BigTech’s Push into FinTech

Beyond Digital Wallets – Navigating BigTech’s Invasion into FinTech

By: Pedro Ferreira

BigTech companies such as Google, Apple and Amazon are major players in the technology industry. Facebook, Tencent and Alibaba (GAAFTA) made strategic moves in 2019. The financial services industry is affected by the payments space. The introduction of eWallets enables payments via smartphones. Smartwatches are a key development in this revolution. The question is: How will BigTech enter the payments market? Should traditional banks respond to the changing landscape?

Development of eWallets – a strategic move

BigTechs have seamlessly integrated payment services into their digital products. Platforms can be created not only by acquiring necessary payment technology, but also by leveraging strategic partnerships. These alliances are not only beneficial for the market but also increase its reach. You can quickly expand your payment options. Although partnerships exist with some banks, it is still necessary to link eWallets to credit or debit cards. Facebook and other BigTechs have decided to go their own way and invest in independent companies. Messenger uses proprietary blockchain crypto technology.

Value creation for BigTechs

The strategies of BigTechs in the payment sector can be summarized as follows: diverse. Their business models focus on creating digital payment solutions and are a natural extension of ecosystems. The advantages that BigTechs and traditional banks face are:

– BigTechs can accept a reduction in consumer fees. Users value its functionality and shift merchant fees away from banks.
– Consumers can be contacted at telephone number (866). BigTech has introduced seamless payment methods to attract customers. Attracting consumer deposits is a Chinese phenomenon.
– Data-driven BigTechs use payment data to refine personalization. Advertising leads to an increase in advertising sales. They also create new products. Functionalities such as semantic search based on payment data.
– Brand Strengthening: Providing a seamless payment experience can improve Apple and is a great example of hardware sales and brand awareness.

What does the future of eWallets look like?

The current BigTech payment system is based on credit cards issued by banks. There is still room for improvement in the debit card market. Next steps could include: PSD2 PIS and solutions based on account-to-account transfers. Instant payments. BigTechs could also explore their own proprietary e-money. Gaining complete control over cryptocurrencies or payment account solutions without banks being a major source of funding.

Banks have 8 strategic imperatives

The threat from BigTechs to traditional banks in the payments space is real. It’s not too late for you to act. Especially European banks. Have the opportunity to be proactive. The following key strategies are:

1. Trust and security: Banks must benefit from their reputation as reliable and secure financial partners. In the changing payments landscape, it is crucial to emphasize the commitment to protecting customers’ financial transactions. This trust can be strengthened by establishing clear communication about robust security measures and encryption protocols.
2. Harnessing advanced customer knowledge: The extensive data they have about their customers is one of their inherent strengths. Banks can use this information to develop financial solutions tailored to their customers’ specific needs. Customer retention and loyalty can be improved by gaining personalized insights into customers’ spending habits, financial goals and risk tolerance.
3. Increase scale and operational efficiency Banks must prioritize initiatives that increase scale and efficiency to compete with Fintechs and BigTechs. Banks can improve their competitiveness by optimizing internal processes, investing in cutting-edge technologies and collaborating with fintech partners.
4. The need for regulatory vigilance, adaptability and a high degree of prudence: The financial industry is characterized by regulatory developments. Banks need to be vigilant and closely monitor changes in regulations, particularly in areas such as data reciprocity or competition law. Banks that adapt to changing regulatory environments can meet the challenges and take advantage of opportunities in today’s financial ecosystem.
5. Improving digital capabilities: To stay relevant, banks must embrace digital transformation. Investing in innovative and user-friendly digital platforms that enable seamless transactions while ensuring robust cybersecurity can improve the overall customer experience. Additionally, integrating cutting-edge technologies such as artificial intelligence and machine learning can enable banks to offer personalized financial services.
6. Cooperations and alliances are encouraged: Fintechs and other industry players can offer traditional banks access to new technologies, expanded market reach or innovative solutions. Strategic alliances enable banks to remain agile, capitalize on emerging trends and improve their competitiveness against BigTech.
7. Customer-centric innovation: Banks should prioritize customer-centric innovations, taking into account the changing preferences of their customers. This involves continually identifying and addressing pain points in the user journey, introducing intuitive digital tools and staying up to date with new trends in financial technology. Banks can stay relevant by proactively responding to customer expectations in a time dominated by technological disruption.
8. Investing in the development of talent and skills: Banks must have a workforce capable of adapting to the latest technologies and innovating. By investing in talent development and training programs, banks can have the human resources necessary to successfully implement and sustain their digital strategies.

The conclusion of the article is:

Traditional payments are still a viable option as BigTech continues to revolutionize the payments landscape. Banks must embrace innovation and leverage their strengths to adapt. Regulatory changes. The race to dominate the future of banking is on. Strategic agility is the key to survival.