In recent years, BigTech companies such as Google, Apple, Amazon, Facebook, Tencent, and Alibaba have been expanding into the payments space, specifically through the introduction of eWallets. These companies have integrated payment services into their digital platforms through strategic partnerships and acquisitions of payment technology.
BigTechs have gained several advantages by offering payment solutions:
- BigTechs can generate revenue from consumer fees and shift merchant fees away from banks.
- They can attract consumer deposits, as seen in China, by offering seamless payment methods.
- BigTechs leverage payment data to refine personalized advertising and develop new functionalities.
- By offering a seamless payment experience, BigTechs can enhance hardware sales and brand awareness.
The evolution of eWallets could include account-to-account transfer-based solutions, proprietary e-money, cryptocurrency, or payment account solutions, which would allow BigTechs to gain complete control without relying on banks.
To respond to the threat posed by BigTechs in the payments arena, traditional banks, particularly in Europe, should focus on several key strategies:
- Leveraging trust and security by emphasizing their commitment to safeguarding clients’ financial transactions and establishing clear communication on robust security measures and encryption protocols.
- Utilizing customer data to develop innovative financial information solutions tailored to address specific pain points of their clientele.
- Prioritizing initiatives that drive scale and operational efficiency, such as streamlining internal processes and investing in cutting-edge technology.
- Maintaining regulatory vigilance and adaptability by closely monitoring changes in regulations and proactively adapting to evolving frameworks.
- Embracing digital transformation and enhancing digital capabilities through user-friendly and innovative platforms and technologies like AI and ML.
- Seeking collaborations and alliances with Fintechs and other industry players to tap into emerging trends and strengthen their competitive position.
- Implementing customer-centric innovation, continuously identifying and addressing pain points in the user journey and staying attuned to emerging trends in financial technology.
- Investing in talent and skill development to ensure that banks have the human capital necessary to implement and sustain digital strategies effectively.
In conclusion, traditional banks must embrace innovation, capitalize on their strengths, and adapt to regulatory shifts in response to BigTechs’ incursion into the payments space. Strategic agility will be key to survival in the future of banking.
