While in the UK it might be fintechs applying for banking licenses hoping to give legacy financial institutions a run for their money, tech giants and large retailers are community banks’ biggest cause for concern stateside.
On Wednesday, small banks protested a potential review of regulation that prevents major retailers, like Amazon, from becoming fully fledged banks, Reuters reports.
“Mixing banking and commerce is a bad idea that keeps recurring like a bad dream,” Paul Merski, representing the Independent Community Bankers of America, said. “It’s one of our bedrock resolutions to oppose the threat of full blown mixing of banking and commerce.”
While no major retailer or tech giant in the United States has locked down a banking license, their offerings have continued to push into financial services.
Amazon offers loans to small businesses, Facebook introduced the capability for users to transmit money via Facebook Messenger in 2015, while Apple just this week released Apple Pay Cash—a product that allows iPhone users to send cash between one another that can immediately be spent in stores accepting Apple Pay.
In the UK, challenger banks like Revolut and Starling Bank seek the consumer confidence and trust a banking license can add. But, for major U.S. retailers and tech companies with well-established brands and wide customer bases, embarking on a banking license is likely to seem more of a regulatory nightmare than it’s worth.
For now, Tim Sloan, Cheif Executive of Wells Fargo, doesn’t see Silicon Valley as a threat to banks. “I don’t think Apple fundamentally wants to become a bank. I don’t think Amazon wants to become a bank,” he said Tuesday, according to Reuters. “They want to use financial services products to help their customers succeed.”
A Mulesoft study, though, did find 28 percent of UK, German, Belgium, and Netherlands customers would consider using banking services provided by the likes of Amazon, Google, Apple, or Facebook. Consumers primarily cited, if they were to be developed, greater convenience in the tech giant’s products. This is an obvious opportunity for both fintechs as well as legacy financial institution, potentially through partnerships with fintechs, to capitalize on.
As Maria Terekhova of Business Insider pointed out, “A good, and simple, place to start would be simply making it easier to open a bank account, a process that often still requires customers to visit a branch and fill out paperwork.”
Cadence is a fintech reporter and writer at Fintech Unltd, where she covers the changing landscape of financial technologies. Previously, Cadence interned at Psychology Today, Business Insider and the Wisconsin State Journal. Cadence is interested in how science and technology intersect with power and culture and is curious about the world we are creating for tomorrow, consciously or not. She graduated from the University of Wisconsin–Madison in 2017 with degrees in Journalism and Chinese. Send tips and story ideas to Cadence at [email protected] You can also follow her on Twitter @cadencebambenek.