The credit agency Standard & Poor’s (S & P) considers that the regulation will be “crucial” to dissuade the efforts of the ‘technological titans’ such as Facebook or Apple to compete with the banking sector and offer their own financial services, although admitting that they have competitive advantages. that make them consolidate as a “potential threat” to alter certain aspects of the banking industry’s value chain.
This is clear from a document published this Monday by the US firm S & P, where it analyzes the future of banking and reflects its opinion on the extent to which large technology companies are presented as a threat to the sector, a reflection that is relevant in a context in which virtual currency portfolios or alternative payment methods have taken a leading role.
“Banking is necessary, banks are not,” said Microsoft founder Bill Gates, in 1994, and which S & P now picks up in its report, considering this appointment as a “premature warning” to financial institutions. “Although barriers to entry in the banking industry are high, large technology groups such as Facebook or Apple have a competitive advantage over fintech or other new entrants (…). They have a high investment capacity, a strong brand, a large number of loyal users or customers and state-of-the-art technology systems, “explains S & P.
However, the US firm, which focuses its study on the capabilities of Google, Apple, Facebook and Amazon, believes that the payment service is the main area where technology companies can potentially affect the banking sector. “Although in the short term we believe that they are not exerting any significant pressure on fee income, we believe that they could take advantage of their strong customer base and networks to restrict the revenue from traditional payment services in the long term,” says the document. .
At the same time, in addition to pointing out that the technology lending activities will mainly target users operating on their platforms and segments currently unattended by banks due to reasons of profitability and capital, S & P believes that lending activities or deposit will not be threatened in the short term, mainly by regulation.
“Regulation will limit the ability of ‘technology titans’ to compete significantly with banks, and in the long term, regulation is likely to remain a key factor in deterring technology efforts to offer a full set of financial services. Banks currently provide (…). Banks may feel the greatest competitive threat in those activities where entry barriers are low, as in the income from transactions, “says S & P.
On the other hand, the transaction fees of the banking entities, as technology companies offer this service, will be increasingly low and will oblige banks to reconsider their retail relationships. In some cases, entities charge little or nothing to customers for offering deposit account services, since they benefit when they use their credit or debit cards.
Although, the lower rates of the cards will alter that model and probably cause the banks to look for other ways to charge for their services and allow them to maintain their margins, explains the US firm.
Similarly, some technology companies, such as Amazon, have begun to grant loans. In fact, according to S & P, the e-commerce giant has generated approximately 3,000 million dollars (2,445 million euros) in loans through its business that analyzes the credit profile of its customers.
“In general, we consider that competition in the credit space of the ‘technological titans’ is still ‘in its infancy.’ At this moment it is difficult to consider these companies as viable alternatives to banks to finance consumer companies, small and medium-sized companies. (SMEs) or even larger companies, “says the credit rating firm.
However, he admits that some niche markets currently neglected by banks, such as microenterprises – especially in the United States – are currently benefiting from the entry of technology companies. “We anticipate that the technology companies will continue to focus their loan business on offering microcredits,” S & P says.