BigTech just got bigger.
Without us noticing, BigTech extended its reach. Of the big four tech firms (Google, Amazon, Facebook, and Apple), three have partnered with top financial institutions to broaden their offerings.
Bigtech isn’t going at it alone
Big tech and big finance are joining forces.
Apple & Goldman Sachs
The tech and financial giants have come together to release a credit card. The card appeals to iPhone owners since it offers 2% cash back on purchases made with Apple Pay, no fees, and an app that assists in managing finances. The card’s number is stored in the iPhone, which generates virtual numbers for purchases that require one.
For Goldman Sachs, the aim of this partnership is to strengthen its up-and-coming consumer brand Marcus which it launched in 2015.
Google & CitiGroup
Google is planning to release smart checking accounts through Google Pay in collaboration with CitiGroup. While it is not entirely clear what this will look like, the idea is that customers will enjoy a Google banking interface backed by an old-fashioned Citi current account.
Amazon & JP Morgan
While no concrete steps have yet been taken, rumor has it that Amazon is interested in offering a checking account-like product to its customers. This step is very much in its infancy, but rumor has it that Amazon is in talks with JP Morgan to promote this initiative.
Why the partnerships?
For starters, customers’ finances are another source of data, providing them not just with new sources of revenue but more importantly new sources of data. For Big Tech, this is a natural direction for expansion.
For financial institutions, collaboration is a matter of survival. The Financial Brand put it well, writing that financial institutions must “gain scale and reshape traditional bank operating models…or slip into irrelevance.”
Consumers should proceed with caution
For consumers these partnerships translate to more choice, and potentially more purchasing power. But consumers should also be wary. According to the Financial Times, “the US Bank Holding Company Act of 1956 was, after all, designed to keep banking and non-banking businesses separate, for fear that a company would use its banking arm to push consumers towards its core business. That idea does not seem so far-fetched today.”
Democrats and Republican alike seem to be against the move and are uniting forces to try to push back these initiatives, so it has yet to be seen how successful they will be.