Does Apple want to be a bank? Technology is already the main competition of traditional entities

Recently Ana Botín directly pointed out Apple as a threat to banks. The competition that financial institutions face is very changing, with new players coming to the fore every year. In this article we explain what steps the Cupertino company is taking and how banks can confront it.

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The directors are clear that it is the large technology platforms, such as Apple, that pose the greatest threat to banks. That is one of the main reasons why banks like Santander seek to evolve towards an open global financial services platform.

Apple takes a turn towards personal finance management

The technology giant announced last month the introduction of a new function for its users in the United Kingdom. This is balance verification through Apple Wallet, thanks to the magic of Open Banking APIs. The excitement is not in seeing how much money you have, but in the possibility of doing it in real time and thus being able to make informed decisions.

Users must first authorize it through the Wallet app and then authenticate using their bank’s app or website. All banking details will be stored on users’ devices and not on Apple servers. Banks included in this beta release are: Barclays, HSBC, Lloyds, RBS, Monzo and Starling.

How the new Apple Wallet service works

If your account has funds, you can use your credit card. But if you’re getting close to the limit, it may make more sense to control your spending or use a debit card. Something so simple has a big impact. According to fintech advisor Meaghan Johnson, this could be the beginning of the company offering a new financial experience directly from your mobile.

Apple could choose to include a PFM if they take advantage of these ideas:

Use geolocation to personalize the user experience

What if, when you are abroad making a purchase, Apple can see it and suggest the most suitable card based on the exchange rates in that country? They could even analyze your previous transactions with the help of Open Banking APIs to determine which card is the most profitable.

Maximize loyalty rewards with geolocation

Imagine that, when you are near a store, Apple detects that one of your cards rewards you with a 3% discount on purchases at Nike (again, thanks to Open Banking APIs that track your previous purchases). Then it may suggest you pay with that card. That would boost consumer loyalty!

Use data to improve your spending habits

Personal finance managers (PFMs) are a fantastic tool, as they let you know if you go over your budget or have an unusual expense. But what if this information appeared in your Apple Wallet just as you are about to make a purchase?

It is like having a friend say, “Are you sure you need that?” at the right time!

Apple is taking surprising steps in the finance sector. This opens a world of possibilities to its users, but poses a risk for traditional entities. What measures can they take? Without a doubt, the one that is giving the best results is the alliance with fintech innovation companies.

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Advantages of the union between banks and FinTechs

FinTechs operating in the B2B sector tend to be extremely agile technology companies that are not affected by the strict regulations of banks. Digitalization is driving greater connectivity between different organizations and reshaping the financial ecosystem. But what are the motivations behind a collaboration between a bank and a fintech?

Entities have two main motivations for collaborating with financial technology companies. On the one hand, customers have become accustomed to a seamless digital experience and expect the same from their bank. This is something few banks can provide (yet). In addition, FinTechs have gone from being just a provider to offer a whole set of on-demand services.

Strategic partnerships are leading to the development of banking as a service (BaaS), where third parties can connect directly to banks’ existing, regulated infrastructure to provide a faultless customer experience. And regulations such as PSD2 offer FinTechs the possibility of integrating with traditional banks and sharing their innovation for mutual benefit.

Data enrichment guarantees customers’ loyalty 

According to a JPMorgan Chase report from earlier this year, as many as 90% of consumers prefer to manage their finances in one place. And, specifically, in their online banking. They demand more and more information to be able to make the best decisions in economic matters. It is not in vain that the new generations are the most financially educated in history.

How can entities help them? Adding value to the immense amount of data generated with daily transactions and showing information of interest to the user.

For example: a bank transaction with an indecipherable name that goes through a FinTech enricher will be displayed with the merchant’s logo, its location, category, amount and even the carbon footprint associated with the expense.

BigTech Banking: How its future looks like

Google, Meta, Wechat or Amazon are other giants that, in addition to being digital natives, agile, innovative and user-focused, have large customer bases and a large availability of funds. What can the financial industry expect from them? Google focuses on applications and data, using the cloud from a financial information management perspective.

Meta continues the idea of creating their own assets to manage and store: “digital clothing, art, videos, virtual events and more”. WhatsApp now even allows you to make payments. In the case of Wechat, with 1.3 billion monthly active users, it is possible to send text messages, make payments, buy tickets or access the news, among many other options.

Amazon, for its part, has become a creator of unique customer experiences, fueling its interest in financial services. One example is the use of customers’ data to better manage credit risk. Against this backdrop, banks are looking for allies among FinTechs, which have proven to be capable of building user loyalty, reducing acquisition costs and increasing the NPS of financial services.

Here I leave you an ebook where we expand information about how large technology companies such as Amazon or Google are growing with the enrichment of data.

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