As the growth and usage of smartphones continue, more and more people are using their devices to make purchases and do their banking. According to Javelin Strategy & Research, 58% of U.S. users will adopt mobile banking by the year 2021. Currently two-thirds of smartphone owners in the U.S. have downloaded at least one financial app. This has made moving into the banking space a logical next step for tech giants like Apple, Amazon, and Facebook.
China serves as a model of what’s possible. There, mobile payment apps like Alipay and WeChat are more than an emerging technology—they’re hugely popular. Alipay has 520 million monthly active users; WeChat has one billion. For the first ten months of 2017 there were $12.8 trillion in mobile transactions in China compared to $49.3 billion in the U.S. If the success experienced by companies like Alipay and WeChat were to be replicated in the U.S., billions of dollars in annual revenue would be taken away from banks. Here’s a synopsis of how tech giants are making inroads into the banking space.
According to the Wall Street Journal, Amazon is exploring the idea of partnering with J.P. Morgan Chase to create an Amazon-branded checking account. The offering would appeal to millennials who are weary of traditional banking institutions and searching for financial alternatives. It’s estimated that nearly three-quarters of this generation are unbanked or underbanked. Such a product would provide Amazon with multiple cross-selling and promotional opportunities. Having customers with checking accounts would also give Amazon additional data to better understand their customers spending habits. Amazon is also looking to build a person-to-person payment capability into Alexa, the company’s virtual assistant.
In partnership with Goldman Sachs, Apple just announced an Apple Card that will launch this summer. The key benefits of the credit card include an easy and instant application process, no late fees, and 2%-3% daily cashback rewards. Billing statements for the new card will be more transparent than those of traditional credit cards, listing the phone numbers and addresses of merchants responsible for each transaction. Apple claims they will not be privy to where customers shop, the amount they pay, or what they purchase. Purchases made with the Apple Card will be verified with FaceID or TouchID. The Apple Card can be used wherever Apple Pay is accepted, which currently includes 70% of merchants in the United States. Customer service will be available via iMessage on an iPhone.
Facebook is laying the groundwork for a cryptocurrency, whereby users will be able to transfer money on the company’s WhatsApp messaging app. Their objective is to create a stablecoin, which is a digital currency pegged to the U.S. dollar, in order to minimize volatility. The product’s focus will initially be in the India market, where WhatsApp has 200 million users. According to followers of Facebook’s LinkedIn page, the company has been hiring talent to join its blockchain group. The blockchain initiative is being run by David Marcus, who left his position as PayPal’s president in 2014 to join Facebook.
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