Much is being written about disruptions in banking from fintech. Yet this piece suggests that the traditional banks have so far warded off that threat fairly well by innovating themselves using technology what with their deep pockets of capital and regulatory protections. This piece however focuses on the threat from Big Tech – not just on the incumbents but also on the financial system and the economy in general. Clearly, China has set the tone in many ways. Consider these:
“Just 10 years after starting Alipay, Alibaba consolidated all of its financial products and services under the umbrella of Ant Financial. Today, Ant Financial offers almost every financial service that the average customer needs, including deposit accounts, credit and wealth management.
The scale of this success is breathtaking: Ant Financial’s market cap is greater than that of Goldman Sachs, and its Yu’e Bao money market fund is the largest in the world. Even so, its offerings are rivaled by Tencent, whose Tenpay platform has even more active users than Alipay.
After successfully chipping away at the business of banking one product at a time, Ant Financial and Tencent opened China’s first internet banks, MYbank and WeBank, in 2014.”
Whilst Big Tech’s ability to drive financial inclusion particularly in the emerging economies of Asia and Africa are indeed positives, regulators are dabbling with concerns on market abuse (big tech has driven monopolies faster than ever), data privacy and the very disruptive and hence potentially destabilising nature of big tech.
“At this point, the rise of banking with big tech triggered a regulatory response from China’s central bank, the People’s Bank of China. Today, the PBoC requires China’s tech giants to link certain internet bank accounts to traditional bank accounts and to keep 100 percent of their “float” in reserve at the central bank itself. This arrangement is designed to safeguard the financial system and also solidifies big tech’s place in its customers’ lives as both the face of traditional banking and as a regulated nonbank.”
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Copyright © 2019 Marcellus Investment Managers Pvt Ltd, All rights reserved.
If you want to read our other published material, please visit https://marcellus.in/blog/
Note: the above material is neither investment research, nor financial advice. Marcellus does not seek payment for or business from this publication in any shape or form. Marcellus Investment Managers is regulated by the Securities and Exchange Board of India as a provider of Portfolio Management Services. Marcellus Investment Managers is also regulated in the United States as an Investment Advisor.
Copyright © 2022 Marcellus Investment Managers Pvt Ltd, All rights reserved.
