Will The Bank Of Google Or Bank Of Amazon Be Born? – Are International IT Companies Uninterested In Banking Services?
As the involvement of international companies such as Amazon, Facebook, and Google in the financial world accelerate, discussions regarding the possibility of the “Bank of Google” or “Bank of Amazon” have started to arise.
According to European and American media reports from November 2017, the United States Secretary of the Treasury has started to show flexible views on the ‘merging of banks and IT companies’.
Currently, regulations are in place that strictly prohibited non-banking institutions from conducting banking matters without permission. However, deregulation could result in the birth of international IT banks.
Conversely, there are some who deny this as a possibility, stating that “major IT companies are not interested in the banking business,”
“A Threat to Banks”- Prediction of the World Economic Forum
In August 2017, the World Economic Forum (WEF) pointed out the possibility of a threat that a major IT company could pose to banks. The report made the predictions based on the outlook of FinTech. By using cutting-edge technologies such as AI (artificial intelligence), big data, and clouds as weapons, an IT company could upset the structure of the financial industry.
These IT companies have already been steadily changing the credit card account payment markets that MasterCard and VISA have dominated for a number of years. Furthermore, there have been rumors that competitors such as Amazon, Facebook, and Wal-Mart consolidate their enterprises in the financial field. They could pose a threat to the existence of major international banks such as Goldman Sachs and JP Morgan Chase.
How quickly and to what extent will Google and Amazon enter the financial realm? Is the birth of the Bank of Google or Bank of Amazon on the horizon? The emergence of this type of question is not out of place.
Is The Goal of International IT Companies Improving Service and Profit?
Regarding this matter, Forrester Research Analyst, Oliwia Berdak, published an interesting report in 2014. In short, her answer was “no”.
Berdak predicted that Google’s entry into the financial market (mainly for settlements, money management, price comparison, and the financial advice field) would continue to accelerate. However, she pointed out that the goal of major IT companies such as Google, Amazon, and Apple is not about banking but to provide “better financial services for their customers.”
In other words, IT companies enter the FinTech market merely because it is the smart way to “increase their profits by listening to the needs of their customer base and market demand.” For example, Fintech’s entrance into the credit card payment market will provide its customers with convenient and low-cost settlement options by encouraging the confidence of their existing customers and allowing them to expand to new customer bases reflecting well on profits.
Amazon’s “1-Click order”, in which the purchase and payment are completed in one click is a typical example of this. Although the definite increase in sales as a result of the “1-Click Order” function has not been announced, many experts estimate it to be around 5% based on the data that shows that the average shopping cart abandonment rate is 70%. When the service was announced in 2011, Amazon’s sales were $48.1 billion. The assumption of a 5% increase in sales due to the “1-Click Order” function amounts to a sales increase of roughly $2.4 billion in a year (Medium.com).
The “Google Wallet” uses the same concept. Google has recently released a digital payment application in India called “Tez”. However, it is clear that this is one of their strategies for entering the rapidly-growing Indian market. It has been speculated that the original intention of Google was not in relation to the banking business but the development of their consumer market and for data collection.
Amazon’s Passion for Discovering People of Excellence in FinTech
Upon close comparison of Google and Amazon, it is Amazon that gives out a stronger impression of awareness towards financial markets.
Although it is not well-known, Amazon frequently recruits exceptional engineers in the United States and India to strengthen its FinTech division. As of December 15, 2017, the Amazon website has been recruiting various people like software development engineers, retail FinTech program managers and application engineers central to Seattle and Hyderabad in south central India. Hyderabad is a central hub for research related to outer space development and biotechnology and is known for the Indian Institute of Technology Hyderabad, a high level internationally revered educational institution for science and engineering.
The recruitment is said to be intended for the purpose of “strengthening Amazon’s FinTech Payment team” and emphasizes the fact that high-quality FinTech engineers are indispensable for “explosive growth”. From this point of view, the possibility of expanding its existing branches into the FinTech realm is not unthinkable.
By cultivating a superior FinTech team and integrating state-of-the-art technology from its past experiences, Amazon has the potential to build a powerful financial system that cannot be imitated by its rivals.