Banks Can Compete Effectively with Big Tech in the New Smart Financial Ecosystem – PaymentsJournal

Big Tech companies are becoming bigger, stickier players in the payments space, appealing to consumers with their pervasive, sleek interfaces and ease of use. However, these tech companies have also continued to lean heavily on banks to supply the very critical back-end payments infrastructure. Many banks have been forced into collaboration with Big Tech to help improve their bottom lines and ultimately to survive. Examples include the Pays Apple, Google, Amazon, AliPay, WeChat and Google, Uber and others entering consumer banking.

But what do banks have that Big Tech wants? The answer is in the data, especially the payments data. The goal of Big Tech is to monetize data to capture, orchestrate and squeeze every drop of value out of it. For example, Google recently revamped Google Pay to include additional features such as offers, cash-back, spending analysis and shopping in an effort to increase its appeal. Google says it uses the payment data of individual consumers to find offers and personalize your experience.

Big Tech relies on the virtuous cycle of data gravity; the more data you generate, the better understanding they have of customers needs and desires, creating greater attraction across the ecosystem. Big Tech views data as a valuable investment because they can quickly generate high financial returns.

Meanwhile, banks simply dont fully appreciate the value of their payments data. Their approach to the massive amounts of data they hold remains disjointed. Payments data is sprawled across the organization in marketing, loyalty, fraud and credit risk silos. Many banks dont even understand how to generate financial returns from their payments data. Instead, they view data as a cost to be managed rather than a valuable resource to draw insights from.

For financial services organizations to avoid being boxed into a low-margin corner, they need to balance collaboration with Big Tech together with their own initiatives to find their most accretive position in the new smart ecosystem, leveraging their unique advantages to stay competitive. Banks must not rely solely on Big Tech to reap the rewards from the payments data that bolsters their own businesses.

A few ways that banks can leverage into their own plentiful data resources and kickstart a data-first mindset include:

Traditional banks must shift thinking and focus on digital payments transformation to activate their competitive differentiation strategies. They also must realize the value they bring when partnering with Big Tech and adjust their strategy and mindset to rise above the competition.

Summary

Article Name

Banks Can Compete Effectively with Big Tech in the New Smart Financial Ecosystem

Description

For financial services organizations to avoid being boxed into a low-margin corner, they need to balance collaboration with Big Tech together with their own initiatives to find their most accretive position in the new smart ecosystem, leveraging their unique advantages to stay competitive.

Author

Lawrence Latvala & Deborah Baxley

Publisher Name

PaymentsJournal

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Banks Can Compete Effectively with Big Tech in the New Smart Financial Ecosystem - PaymentsJournal