It’s an exciting time as Silicon Valley giants make a beeline for payments. Apple, Google and Facebook have all made forays into enabling payments. These technopreneurial brands are now embedding payment technology directly into their products and services.
Consider Facebook. In 2015, the social media giant started giving users the option of securely sending and receiving money via its Messenger app1. The service, which currently only extends to US customers, makes use of a linked debit card to enable friend-to-friend payments straight from chat.
Then, look at what Apple and Google are doing in the payment space. Apple Pay, which turns smartphones into instant wallets, has recently launched in the United Arab Emirates in partnership with banks such as EmiratesNBD, Mashreq Bank, Emirates Islamic Bank, Rakbank, Standard Chartered, and HSBC2. All customers with an Apple Pay-enabled iPhone need to do is position their phone near a contactless scanner and use the phone’s Touch or Face ID to authenticate.
Meanwhile, Google’s contactless payment offering comes from its Android Pay app for the universe of phones running the Android operating system. The app channels cards linked to a user’s Google Account to make payments on the fly. It works like Apple Pay: all users must do is to push their phone close to a scanner and then confirm payment.
For customers, this is a bold new world of convenience and speed. But what are the ramifications for financial service providers? Is Silicon Valley’s march into payments a threat or an opportunity?
The answer is a bit of both; but with far more opportunity than threat. While some research has suggested that traditional Wall Street banks might find themselves under siege thanks to platform companies such as Amazon, Alibaba And Rakuten as they become the front end for big finance3, there’s another side of the coin too.
And that side of the coin is collaboration, not competition. Silicon Valley companies aren’t traditional finance houses. They don’t want to become embroiled in the compliance, KYC, data protection, security policies and so on that financial services brands such as Xpress Money focus on to keep their customers safe.
Apple, Google and Facbook et al aren’t recreating the financial services wheel. Rather, they’re focusing on taking these conventional services to new audiences in new and exciting ways. In more technical parlance, they’re concerned with first and last mile delivery – i.e. how customers request a financial transaction, and what the end result is. They’re not going to get involved in actually processing transactions because that isn’t where their capabilities lie.
The evidence is clear. Facebook’s Messenger friend-to-friend payments are powered by PayPal. Google uses debit cards issued by conventional banks to power its Android Pay. Apple is tying up with big banking providers for its Apple Pay too. This new ecosystem is built on partnerships with conventional financial providers.
And these traditional financial players can actually benefit from the reach and scale big social tech firms bring to the table. These Silicon Valley companies specialise in reaching and serving large consumer audiences in ways that banks just don’t.
At Xpress Money, we’ve long been aware of the opportunities presented by collaboration. That’s why – to cite just one example – we’ve innovated an open API for international money transfers. It’s simple, fast and plug ‘n play. Partners can link up to it easily to use our systems to enable international money transfers. Powerful banking brands such as ADCB rely on our system. ADCB customers request the transfer using the bank’s online portal, and we handle the rest.
Here’s the bottom line: There’s little point trying to take on Facebook in social media, or Apple in building great phones. Likewise, these brands aren’t interested in direct competition in payment processing. They want the same thing that Xpress Money does – unlocking a new world of speed, convenience and social transactions. So, the next time one of these big brands want to enable intuitive payments, we’re going to offer to help. Because the eventual winner is the customer, and that’s perfectly alright by us.
Written by Arundhoti Banerjee, Associate Vice President – Digital & Global Strategy