Here’s Why Tech Giants are Claiming Space in the Payments Industry
We all know the top players in the financial industry: Bank of America, JP Morgan Chase, Wells Fargo — those major banks that have been around for eons. But is that list about to also include the site where you bought your books in college?
The large giants in the tech industry have a clear pattern of making their way into a wide range of industries. Increasingly in recent years, they’re getting deeply ingrained into the payment industry. From payment gateway options to digital bank accounts, you might have more options from individual companies than you think.
Let’s take a closer look at where those tech giants stand today and why they’re further advancing their payment businesses into the future.
Tech Giants in Finance: Where We are Today
The four US tech empires are also known as GAFA: Google, Amazon, Facebook, and Apple. All of these businesses have taken leaps into the payment space, along with others around the world.
Google Pay and Google Wallet have long been convenience and security features for Android users in particular. However, this tech leader has been working with multiple traditional banks to develop their own debit card for digital bank accounts.
Amazon
Amazon has been in the finance game longer than most people realize, but much of their work has focused on business lending. However, they now offer multiple credit cards for their customers. They’re continuing to expand in this market with an Amazon Credit Builder card which they released with Synchrony Bank in 2019. It’s a secured credit card meant to help their customers develop stronger credit.
While most of the tech royalty has been developing new payment methods, Facebook is creating an entirely new currency. Backed by a digital wallet called Novi, Facebook’s currency Libra will be a stablecoin. Stablecoin is a digital blockchain currency like BitCoin, but its value is tied to a more concrete currency so it remains more stable. In this case, Facebook is linking Libra’s value to several global currencies because their aim is to make international payments as smooth as local payments.
In addition to Libra, though, Facebook has its service, Facebook Pay. Facebook Pay enables payments across all the company’s apps: Facebook, Messenger, Instagram, and WhatsApp. In fact, Facebook also recently launched a new business unit called Facebook Financial, so it appears they intend to keep growing their payments business.
Apple
Next up is Apple, who of course was among the first on the digital finance scene with Apple Pay. That well-established service is becoming even more widespread now that the COVID-19 pandemic has sparked new demand for contactless payments.
Apple hasn’t stopped there, though. The brand has its own credit card which it has developed in partnership with Goldman Sachs, as well as Apple Cash, a Venmo-like service which lets customers transfer cash between friends.
Alibaba
Beyond the US, another tech giant is working its way further into the payment industry too: Alibaba, often known as the Chinese version of Amazon. The brand offers Alipay as an online payment option, but they later expanded to add other financial services including loans, market investments, and insurance.
On top of those products, Alibaba offers WeChat Pay which works in a similar way to Facebook Pay in WhatsApp. Most recently, the business has made its way into digital business bank accounts too.
Why are Big Tech Giants Getting Into the Payments Industry?
It’s clear that many of today’s tech enterprises are investing in the payments industry and have plans to continue and expand that line of business. But why? In truth, there are several reasons why the payment industry is a natural next step for these high-tech pros.
The Data Market
While Apple and Amazon have clear B2C revenue streams, chances are that you’ve never knowingly paid a dime to the others. In the case of all the GAFA giants, a large portion of their money comes from your data. By collecting data about users’ habits, they’re able to charge advertisers a premium for targeted, effective ads. Becoming a payment gateway gives them even more data to use toward that money-maker.
Creating a Better Option
Quite simply, customers are frustrated with traditional banks. They process payments slowly and don’t do a good job of protecting customers from fraud, and they’re slow to innovate as well. Tech companies are seeing that customers want better options so they’re happy to jump in and provide their own solutions.
Using Existing Systems
Convenience is always a factor in consumers’ decisions, and that includes their payment decisions. One thing all the GAFA empires have in common is that they’re well-known brands with extremely large user bases. They already have popular platforms, so customers are more likely to hop on board with their new payment options rather than seeking out an entirely different bank or service provider.
Financial Strength
The payments world isn’t necessarily a safe investment choice. It can be expensive and time-consuming to get started. While smaller businesses would risk running out of money before going to market, these tech corporations have as deep of pockets as you can find, so it’s far less of a risk.
What Might Hold Back Tech Giants in the Payments World?
While the future is bright for tech companies in the payments world, it isn’t without its rain clouds. There are a few hurdles that could hold back those businesses’ progress (and already have in some cases).
Regulatory Pushback
Many regulators within the financial world have serious concerns about these tech giants becoming financial powers. For one, they have concerns about whether these businesses will handle customers’ data with privacy.
In addition, some regulators worry that because these tech companies have so much more money than traditional banks, they’ll wipe out too many banks and cut down on competition in a way that hurts consumers. The companies will need to ease these worries to get regulators on their side.
Customer Trust
Regulators don’t have great trust for tech giants, and frankly, many customers don’t either. After all, there has been intense scrutiny of these tech companies’ data privacy policies in recent years.
To find out how Macropay fits into this changing world, learn more about our payments dashboard and other payment gateway tools.
At the same time, consumers are faced with a difficult choice. Do they go with traditional banks, who often leave their data vulnerable to fraudsters? Or opt for tech giants who have great security but might be using customers’ data for their own gain?
Our Vision for the Future of Technology-Based Payments
Ultimately, we believe that the key to success for these tech companies (and any payment gateway for that matter) will be to maintain a focus on the customer. The purpose should be to serve customers’ increasingly digital needs, incorporate greater inclusivity, and work toward a more connected world.
