Google, Apple, Facebook, and Amazon have all entered financial services in different ways and to a different extent:
Although GAFA often gets the most exposure and media time, their Asian equivalents may already be ahead. So far they have expanded little outside of their home markets, but anywhere with a Chinese or South Korean diaspora, especially within Asia, is a target market.
Baidu, Alibaba and Tencent are Chinese Internet giants that offer search, ecommerce and messaging comparable to Google, Amazon and Facebook. Kakao is a South Korean social messaging app that is having spectacular success in its home market.
Foremost amongst popular social messaging in South Korea, app Kakao Talk launched digital-only KakaoBank in 2017, acquiring two million customers inside two weeks of launching. Its user base continued to grow to six million by 2019, and to 14.3 million by March 2021 – which is 33 per cent of Korea’s adult population. KakaoBank’s products and services include a payment account with a debit card, loans, and remittances.
Similarly, in China, banks such as MYbank and Webank backed respectively by Ant Group (which includes Alibaba and the Alipay payment platform or superapp) and Tencent, (owner of WeChat and 30 per cent owner of WeBank), have seen strong user-base growth following their launch in 2015. WeBank offers unsecured lending to over 60 million customers in over 500 cities by leveraging Tencent’s social media base. MYbank has leveraged Alibaba’s strong merchant network on the ecommerce platform by offering loans to over 6 million small businesses.
GAFA and BAT threaten everyone
The threat that Big Tech pose to incumbents and fintechs is daunting given the absence of any cost drag from legacy systems and under-used branch networks, a common problems for incumbents. They also have a natural advantage in customer acquisition owing to their high user engagement models. Further, the diverse nature of these large tech companies could mean that cross-subsidisation allows these firms to operate even while making losses to grab greater market share.
These experiences are successful examples of Internet companies venturing into banking. Lessons learnt include:
Elsewhere in the world there is a trend towards banking as a Service (BaaS) and large tech companies have often co-opted banking service components.