Podcast: Big Tech vs. Banks. Finally a Fair Fight
In Barron’s finance and business podcast, we discuss why it’s so hard for big tech to break into banking.
Alex Eule and Ben Walsh discuss why it’s proven so hard for big tech to break into banking.
For a supposedly obsolete idea, the checkbook still holds a lot of power. It remains the gateway to Americans’ money. Not surprisingly, big tech companies want in on the party.
Last week, Facebook (FB) said it plans to release a product called Facebook Pay, which will let Facebook users send money to one another directly, much like PayPal’s (PYPL) Venmo app. Google (GOOGL) is planning to offer checking accounts sometime in 2020. And Apple (AAPL) has also expanded into financial services with its credit card.
So, is big tech’s takeover of finance finally here? Not according to Barron’s reporter Ben Walsh.
“I think that what this shows is the opposite: How durable big banks are. They are not going anywhere, and they continue to churn out profits and tech has proven to have a difficult road getting into finance.
In the latest episode of The Readback, Ben Walsh argues that the disruption hasn’t happened largely because of financial regulation :
“Bank regulators have done a great job over the last 80 to 90 years on defining what the products that banks can offer are. So when you think about what a bank can sell you—checking and savings accounts, mortgages, credit cards, different investment products—all are very narrowly defined and well regulated within those confines.
“What that ends up meaning is that if you want to get into finance as a business perspective, there’s only so many things you can offer. There’s not a new space to come into. And so technology company ends up offering products that are substantially similar—or they don’t end up happening.”
Both Apple and Google basically tie their new services to traditional banking. Goldman Sachs (GS) does all the underwriting for the Apple credit card, Google’s checking accounts will be offered through Citigroup (C). When Facebook recently tried to go beyond the existing financial framework with its cryptocurrency Libra, it received a lot of pushback from regulators.
The Readback is a finance and business podcast published every Wednesday. We’d love to know what you think of the show, so please take a moment to rate and review us in iTunes—or write to Alex Eule at email@example.com and producer Mette Lützhøft at firstname.lastname@example.org.
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