Big Tech's occupation of the financial sector

In recent years, with the uniqueness of its business model, the advantages of network externalities arising from the interaction of a large number of member users and multiple services, and its superior data analysis capabilities, Big Tech has become a leader in the field of financial technology development. An object that cannot be ignored by financial regulators. In 2018, the scale of digital lending provided by Big Tech in the world surpassed that of FinTech companies for the first time. In recent years, in response to the financing needs of the epidemic, it has accelerated the development of the Big Tech digital lending market.

In 2020, the scale of global non-bank lending reached US$700 billion, of which 86% came from Big Tech, which is much higher than 57.2% in 2018. In addition to the digital lending business, payment is another key development area of Big Tech. In addition, some Big Tech also provides financial services such as insurance, investment and wealth management, and savings. Let's follow Mark today to see how Big Tech is occupying the financial field!

1. Introduce what is Big Tech

Big Tech is a technology giant, also known as a technology giant, also known as Tech Giants, Big Four, Four Horsemen, Big Five and S&P 5, is a collective name for the largest and most dominant companies in the information technology industry, especially the United States Amazon, Apple, Google (Alphabet), Facebook (Meta) and Microsoft, these companies are not only in the United States, but also occupy a leading position in the world's information technology industry.

2. The current occupation of Big Tech in the financial field

Amazon: Actively deploy European and Asian digital lending markets (credit terms, payment)

In recent years, Amazon has actively developed credit services. Based on payment and data, it cooperates with third-party operators to provide loan services for suppliers and consumers on the e-commerce platform.

• 2018

In terms of corporate loans, in 2018, it launched a SME credit card with American Express to provide financing services to SMEs in the form of credit cards.

• 2020 - Partner with Goldman Sachs Marcus

Partnering with the Goldman Sachs Marcus brand, combining the wealth of data on the platform with Goldman Sachs' professional lending capabilities to provide selected sellers/SMEs with credit services of up to $1 million, this is the first time Amazon has opened its treasure trove of seller sales data to third-party financial institutions Institutional lending service model; on the official website, Amazon provides lending services to small and medium-sized enterprises in the United States, and provides fast-track lending services to qualified small and medium-sized enterprises that do not require complicated documents and lengthy waiting.

• 2020 - Partnership with ING

In cooperation with Germany's ING, it provides 10,000 to 750,000 euros of loan services to SME sellers. In terms of lending to consumers, Amazon mostly provides financing services to consumers by rewarding credit cards such as Amazon Rewards Visa Card.

• Cooperated with different industries many times

With the rise of zero-interest installment, buy now, pay later (BNPL), Amazon has partnered with fintech and banking players such as Klarna, Quadpay, Citi, and India's Capital Float and Karur Vysya Bank, Germany's Barclays Bank, Spain's Fintonic, and Cofidis , providing BNPL financing services to consumers in the United States, India, Germany, Spain and other countries.

Apple: Partner with MasterCard, Goldman Sachs to launch Buy Now Pay Later (BNPL) service (credit terms, payment)

• 2022

Apple mainly provides BNPL services to consumers who purchase Apple products through cooperation with MasterCard and Goldman Sachs; in 2022, Apple will provide users with Apple Pay Later short-term loans (the loan amount can reach about 1,000 US dollars), except before the loan is reviewed. The loan will only be approved if the borrower's repayment ability is ensured after a credit check by the users of its wholly-owned subsidiary.

Apple has partnered with Goldman Sachs Bank and CoreCard on the Apple Card credit card, with Green Dot on Apple Cash, and with Citizens Bank on the iPhone upgrade program, but Bloomberg says Apple's work in financial services will target future products, not its own existing products.

According to "Bloomberg" reports, Apple's newly established subsidiary, called Apple Financing, has obtained the necessary licenses to process loans and is expected to operate separately from Apple itself. Apple is not just a role to provide Apple Pay tools, but will personally provide Buy now, pay later. In cooperation with Goldman Sachs, Apple has established a wholly-owned subsidiary with lending qualifications, and will operate its own financial services such as lending, credit scoring, and risk assessment, which also means that Apple will enter the financial field from technology.

Apple is developing payment processing technology and infrastructure such as loan risk assessment, fraud analysis, credit checking and dispute resolution, as well as tools for calculating interest, rewards, approving transactions, reporting data to credit bureaus, increasing credit limits, and more. Part of this project is known internally as "Breakout" because it will lead Apple away from the financial system it currently uses.

Google: Entering the digital lending market for small and micro businesses in India (banking services, credit terms, payments)

• 2018

Google entered the SME lending market with Google Pay, and in 2018 cooperated with banks to provide real-time credit information and provide loan services to its customers.

• 2020

In recent years, Google has used AI software to deepen corporate financing services. In 2020, Lending DocAI will be launched. As the name suggests, it mainly uses AI document recognition technology to automatically perform routine document review and provide financing services. This product is mainly targeted at mortgage loan companies. Document workflows such as borrower income and assets, improve borrower experience and compliant and fast mortgage loans. Google believes that Lending DocAI can reduce lending risk and enhance compliance through technologies such as data access control and transparency, data residency, customer-managed encryption keys, and more.

• 2021

Google has entered the Indian lending market, partnering with Indian digital lending company FlexiLoans to expand secure digital lending services to small and micro businesses in India. In addition, during the epidemic, Google especially used the "Grow with Google Small Business Fund" to help minorities, women and other underfunded companies obtain low-cost funds.

3. What problems will Big Tech occupy in the financial sector?

1. In order to avoid unfair competition, financial service information must be shared with banks and financial technology companies.

The Financial Stability Board (FSB), the governing body of the world's major financial centres, said the growing reach of tech giants has raised questions about financial stability, competition and data privacy. For example, Facebook's plan to launch a "Libra" stablecoin faces strong doubts from regulators and requires that risks, especially related to money laundering, illegal financing, and consumer and investor protection, must be assessed and deal with appropriately.

The FSB called for "vigilant monitoring" of tech giants' shift to financial services in a report released, saying the move by tech giants could undermine banks' ability to generate capital by retaining surplus. The FSB said that participants including Microsoft, Amazon, eBay, Baidu, Apple, and Facebook all have large-scale databases, and also provide asset management, payment and lending, and have the ability to divide up the bank's profit sources in the future.

Many tech giants, like Amazon, eBay, Facebook and Google, have already obtained payments-related licenses in EU countries including Luxembourg, Ireland and Lithuania - although most of these companies have not yet amassed significant capital. Banks in Europe and elsewhere have been required to share customer data with third-party fintech companies, and tech giants may need to do the same, the FSB said.

2. The Bank for International Settlements (BIS) stated that with more and more large technology companies involved in the financial services field, in order to maintain the stability of the financial system, the importance of financial supervision of technology giants has become more and more urgent.

The current banking system may not be able to respond adequately to Big Tech's forays into the financial sector, both with potential systemic impacts and spillover effects on the financial sector. The surge in users such as Google and Facebook, as well as the fact that Alibaba Group and Tencent Holdings control more than 90% of China's mobile payment market, explain the rapid growth of technology companies in financial services because of their huge user base.

Central bankers and financial authorities around the world worry that the troves of data held by tech groups such as Facebook, Google, Amazon and Alibaba could give them the ability to rapidly reshape the financial system, thereby destabilizing the banking system. The BIS believes that tech giants, which play key roles in fintech fields such as payments, should be subject to stricter regulatory scrutiny to prevent the growing power from posing a threat to financial stability and subsequent data privacy concerns.

4. The impact of Big Tech on society

Both the United States and China have recently increased their supervision and management of Big Tech; however, the reasons for pressure are different, the risks and future directions will also be different, and the meaning of Big Tech is different in the United States and China.

• The United States refers to GAFAM, that is, Google, Amazon, Facebook, Apple and Microsoft, the five super companies that dominate the digital world. The five companies have a market value of more than 100 billion US dollars, of which Apple is more than 2 trillion US dollars, which means that the world's only There are seven countries whose GDP exceeds Apple's.
• China refers to BAT, which is Baidu, Alibaba and Tencent. The rising stars in recent years are joined by TMD (Toutiao) (which belongs to the ByteDance Group together with Douyin), Meituan and DiDi.

These 11 tech giants have faced increasing pressure from the society and governments of various countries in recent years. On the one hand, these pressures come from the high market share and market power of these companies in the relevant markets, and on the other hand, because of the high market share and market power provided by the tech giants. Products and services have fully penetrated into the economic, social and personal levels of various countries, and have even become the daily necessities of billions of people, with unparalleled influence.

Former US President Donald Trump angrily sued the two companies for censoring his content because he was blocked by Facebook and Twitter, which is a demonstration of his influence. American GAFAM has long been concerned by competition law in Europe and the United States. Because the five companies of GAFAM are not only technologically advanced, but their businesses are of a strong platform economy and network economy. Once the market share exceeds the threshold, it will be highly attractive to potential users, and the addition of new users will increase the stickiness of existing users.

Coupled with the technological heritage and four mergers and acquisitions, the big one is Evergrande and the larger structure is not easy to shake. Market position itself is not a problem, the key is whether there is abuse. In the past, Microsoft and Google were sentenced to sky-high fines for violating competition laws, mainly because they were found to have abused their positions to hinder competition.

5. Mark’s thoughts

The most recent case in Taiwan is the retail industry’s entry into electronic payment, especially after Quanlian successfully merged with RT-Mart in 2022, Quanlian also launched its own electronic payment “Quan Payment” with its channel advantages. This move not only entered the financial industry, but also It also joined hands with FamilyMart to expand each other's payment ecosystem. This is not a good thing for banks. In the future, banks want to catch up with customers, but the door to enter the channel is getting narrower and narrower.

After the revision of the Regulations on Electronic Payment Institutions in 2021, electronic payment providers will be transformed into "micro-banks", which can handle domestic and foreign small-value exchange, foreign currency trading, etc., especially for retailers such as Quanlian, with The advantages of membership, access and usage scenarios will definitely erode the ecosystem laid out by the traditional financial industry. Mark believes that in the future, if the relevant technologies of these companies are strengthened and their data analysis capabilities are improved, the payment market in Taiwan will change greatly.