Citi: If you had to mention one BigTech company that has already expanded into financial services, or will likely do so in the future, which one would you most expect to have the biggest disruptive impact on its domestic financial sector?
Zennon Kapron: We are seeing the future today. The way that China’s tech giants have not only taken over their respective niches but have captured the everyday habits across a number of products and services is unmatched.
What will be interesting is how they leverage technology for the next wave of innovation. We are already seeing them experiment with AR/VR, AI, and Blockchain; that, coupled with an incredible amount of user data, should enable business models that it would be difficult to imagine today.
Pick #1. Bank of the Future: The ABCs of Digital Disruption in Finance
The Internet-based platform companies − such as Amazon, Alibaba, Facebook or Tencent − have captured an ever-increasing share of consumers’ time and attention. These platform companies view payments and financial services not as an end in itself but as a tool to further enhance client stickiness, and they monetize via advertising, e-commerce, or other services (such as AWS). And when these platform companies have gone into payments and finance, mainly in emerging markets so far, they have gone big.
Finance is being reimagined and recreated in emerging markets by BigTech players with the proliferation of mobile platforms, a growing middle class, and favorable government policies. Tenfold improvements are more likely in new markets that can “leapfrog” established technology − e.g., go mobile-first/only, skipping the landline phase in telecom. When it comes to BigTech in finance, Zennon Kapron notes that “we are seeing the future today” in China. New entrants have made a mark in the consumer payments and finance space in Asia, especially in China, but also increasingly in markets such as Korea and India.
Source: Bank of the Future: The ABCs of Digital Disruption in Finance, Citi Research
Pick #2. Open Banking Pilot Begins in New Zealand
Payments NZ has begun a pilot project with ASB, BNZ, Paymark, Datacom, TradeMe, and Westpac to develop two payment-related APIs.
Part of the API pilot involved establishing who would be liable if security was breached, and money was lost; banks, customers or tech companies providing the open banking apps. The aim was to complete the pilot by the end of the year.
Open banking app Jude will let users connect all their bank accounts to its platform, so for the first time, it will be possible for people to seamlessly operate accounts and services from different banks through a single portal. Effectively, people will be able to build their own bank from the best accounts and services, potentially ending the era of people having all their business with a single bank.
People who can’t be bothered to type will be able to do their banking using voice commands.
The APIs being tested in the pilot are “Account Information” and “Payment Initiation,” which will allow people to use open banking apps to securely access their account details and payments.
Pick #3. Ford Patent Envisions Car-to-Car Crypto Transactions
A new patent awarded to Ford suggests the US automaker is considering the use of cryptocurrency to let cars on the road communicate with each other and reduce traffic.
The patent: “Vehicle-to-vehicle cooperation to marshal traffic” − focuses on ways to alleviate traffic congestion, proposing that communication to coordinate speeds between vehicles can counteract, in part, “the psychology of human drivers who focus on their individual travel time preferences.”
The document details a Cooperatively Managed Merge & Pass (CMMP) System in which driving behavior is monitored, recorded, and evaluated in a collective manner by themselves and other participating vehicles.