Disrupting Retail Banking: The Era of Big Tech

GlobalData's Disrupting Retail Banking: The Era of Big Tech report highlights the increasing role that technology plays in 21st century life, which has led to the banking sector being the latest industry to be disrupted. This has led traditional incumbent banks to make technology a key part of their strategic goals, including dedicated technology departments and chief technology officers as well as partnerships with technology giants. As technology and particularly data play an even greater role in financial services, it has become apparent that very little stands in the way of technology giants offering financial services themselves. They have the reach, resources, and brand to entice customers, who are more willing than ever to try new offerings due to the stagnant levels of service they have received over the last two decades.

• Tech companies are developing ecosystems on their platforms through which they hope to extract as much value from customers as possible. Previously tech companies only sought to collect user data, which they often sold to third parties. Now data is increasingly being used internally to understand how to influence customer decision-making – particularly as it relates to the integrated marketplaces on their platforms.

• With regard to marketing strategy, big tech companies broadly fall into two camps. Established companies have all chosen blanket marketing strategies, not particularly targeting any specific demographic, mainly seeking to extend the relationships they have with existing customers. Contrastingly, the likes of Robinhood, Klarna, and Yolt have targeted specific demographics (usually young people) and have used gamification, referral bonuses, and other tools to generate interest in their offerings before launch.

• The approach to revenue generation by big tech companies has been monolithic. All companies have effectively prioritized growth at the expense of revenue, and have not monetized the vast majority of financial services products they have launched.

• While the likes of Facebook, Amazon, and Google are all entering financial services, they have each done so from different angles. This suggests there is no one way for such companies to enter the industry, meaning the threat to incumbents is larger than anticipated and cannot be precisely mapped.

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