Armed with information technology, products and services, originally existed in a physical form or provided in a traditional way, are being massively and increasingly digitized nowadays. In reality, digital services are so embedded in our lives that we can’t even live without them. Examples range from early transformative industries, such as the retail industry (Amazon), entertainment industry (Netflix), and internet service industry (Google), to recently transformative industries, in particular banking industry.
Among all industries, banking industry deserves some further discussion (The Economist, 2019). First, it’s late to the smartphone age for a reason. Due to its critical role as a funds channel, and in a broader sense, as an economic stabilizer, innovators in the banking industry have been put off by regulations. Second, banks are not the only players in the game, so are technology giants. And, with the technology companies muscling in, the business landscape of the banking industry is definitely going to change. Consider 3 well-known examples:
- Apple unveiled a credit card launch on March 25th.
- Facebook is proposing a payments service for buying tickets and settling bills.
- Alipay is not just a payment app, but also an online platform bundled with e-commerce, chat and ride-hailing services offered by firms such as Alibaba and Tencent in China.
Although such network-based banking services achieve greater convenience and efficiency than ever before, potential risks are looming, specifically, data privacy and industry concentration. From company’s perspective, customer data are now seen as a valuable resource. Through the data collection and data analysis, a company can gain business insights, and thus can make strategic decision that creates impact. However, as tech giants acquire more data that empowers them to capture higher profits, the market structure becomes more concentrated (OECD, 2019). From customer’s perspective, we should have sovereignty over our data, which may or may not be used as a monetization tool by the companies.
To tackle the serious problems, EU is currently proposing two approaches: protect individual privacy and foster competition within industry (BusinessTelegraph, 2019). The first principle requires that we, as customers, gain control over our own data, having the right to determine who, when, and how to use them. The second principle deals with the interoperability between services, in the sense that users can easily switch between providers, shifting to firms that treat customers more ethically. In the same spirit, Germany has changed its laws to stop tech giants buying up scores of startups that might pose a threat in the future.
In conclusion, even though we all agree on the role of technology played in our daily lives, the banking industry, a recognizably conservative industry, has been disrupted by the tech giants, who now start to gain the foothold and might one day become a dominant leader. However, while enjoying the benefits brought by digital services, we have to be aware of data privacy issue that might expose us to unnecessary risks, and decreased market competition that might limit our choices and lower industry standards.
Bibliography
The Economist. (2019). Tech’s raid on the banks. [online] Available at: https://www.economist.com/leaders/2019/05/02/techs-raid-on-the-banks [Accessed 20 Sep. 2019].
OECD. (2019). Market Concentration. [online] Available at: https://one.oecd.org/document/DAF/COMP/WD(2018)46/en/pdf [Accessed 20 Sep. 2019].
BusinessTelegraph. (2019). Why big tech should fear Europe – The Economist – BusinessTelegraph. [online] Available at: https://www.businesstelegraph.co.uk/why-big-tech-should-fear-europe-the-economist/ [Accessed 18 Sep. 2019].
