With the entry of tech giants – Apple Inc. (NASDAQ:AAPL), and Facebook, Inc. (NASDAQ:FB) into the finance industry, the big banks are teaming up with younger rivals to stay afloat. To move in tandem with the changing times, several big banks are either buying start-up competitors outright or teaming up with them. It helps them to avoid the expensive buildup of tech projects in-house. This message is emanated from the bank executives after a recent financial services conference held in London.
Save money and stay secure
Partnerships allow banks to use the technical capabilities of tech firms like Apple or Facebook, with no need to get technological know-how. The tech companies allow big banks to try new products securely without pumping in large sums for in-house development. Such an alliance prevents security risks for the heavily regulated banks.
Chief Development Officer of Westpac, Macgregor Duncan said the company would team up with fintech firms and also learn the new products. They will also establish a partnership with tech firms to develop new products and improve capability/ stay competent. The banks have zero risk policy inside.
Exemplary partnerships in 2018
An Australian lender – Westpac entered a pact with Assembly Payments in 2018 to introduce a payments platform for the business customers. Reinventure, its venture fund, has also invested in the Assembly Payments, a six-year-old company. Assembly Payments is a competitor to Adyen, Stripe, and Square.
According to Macgregor, Westpac has to put in large chunks of funds to build on their own and time-consuming. Westpac has to adhere to zero-risk policy inside the organization.
Adopt changes fast
It is time for the big lenders to move faster to adopt the new technology to prevent landing in troubles.
Earlier this week, Christian Sewing, Chief Executive Officer of Deutsche Bank, said Alipay, Facebook, Amazon, and Google command a larger share of the banks. In China, tech companies are influencing the customers with Mobile Wallets, including WeChat of Tencent and Alipay and garnering a significant share. They are spending a lot of funds to engage the customers.
Facebook has introduced Libra to facilitate overseas payments quickly. However, it may not launch Libra in India because the current regulations do not allow blockchain-based currency transactions. Apple joined hands with Goldman Sachs and introduced a credit card.