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When Amazon turns the living room into a bank


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Nice article of one of the biggest German (online) newspapers. No direct relation to Ripple, but Amazon, Banks, Alibaba & Tencent ...

Here is the article in Google Translation:



"Alexa, book the kite flight at the end of June." - "I'm booking the hang-gliding date at the end of June, what about a suitable accident insurance?" - "Okay, get me an offer out and pay via my Amazon account."

In the future, dialogues with Amazon's smart Echo speaker might look like this or similar. Consumers can conveniently order products and services from the living room, additional services and payment are provided by Artificial Intelligence (AI).

For the financial institutions in Germany, however, it is a horror scenario: technology companies such as Amazon, Facebook, the Google mother Alphabet or Apple could enter with their own financial offers in the market - and dig their business.

According to experts, entering the major technology companies in the banking and insurance market is only a matter of time. "This is an important topic for the savings banks," says Jens Rieken, who heads the Sparkassen Innovation Hub, where new products and services are developed. According to the "World Insurance Report 2018" of the consulting firm Capgemini, the technology companies are in the starting blocks to soon compete with insurance companies.

The revolution could come through the living room: One of the instruments with which, for example, Amazon could spread its financial services is the echo, which is also enjoying increasing popularity in Germany.

Door opener for tech companies

The fear that Silicon Valley might pave the way for the financial sector has recently been fueled. US media reports that Amazon is exploring a partnership with US bank JPMorgan, among others. On request, Amazon did not comment on this. The group would not participate in speculation, they said.

Banks and savings banks have been discussing possible competition from tech companies for years. "At first smaller fintechs were seen as a danger," says Sven Korschinowski, digital banking expert of the consulting firm KPMG. In the meantime, the banks have realized that they are not in danger from there. This is also suggested by a study by the World Economic Forum in Davos (WEF). It concludes that the biggest threat to the banking sector is rather the large technology companies.

The large corporations with which many banks are currently working together could make their partners superfluous and replace their offers with their own services. Many of the technology companies already own banking licenses. It is precisely the endeavor of financial institutions to provide their customers with a better user experience that would open doors for competitors from the tech sector, according to the WEF study.

Experiments with echo

Many banks and savings banks have long recognized that they have to offer their customers more than cash dispensers and store-based account managers. Online and mobile banking have become a matter of course.

Some institutions have already experimented with Amazon's echo, for example, to query share prices by voice through the intelligent assistant Alexa. Since the end of last year, however, Amazon has not allowed any more banking skills. This gives room for speculation that the Internet company itself wants to enter the banking business, says Rieken. He sees voice applications as a new channel for customer contact.

"Technology plays a prominent role in the customer approach," says KPMG expert Korschinowski. That was a disadvantage for banks that did not use existing technologies enough. "The big tech companies are way up here."

For example, Alexa could ask for real estate financing or insurance policies in the living room dialogue. "The banks are then far away from the customer," says Korschinowski. However, the classic providers would still have a chance if they faced the technological challenges.

The consulting firm Bain & Company certifies that Amazon has a very good chance to change the banking sector just as much as trading. The group does not aspire to become a bank, it says in an analysis. Instead, partner banks take over the management of deposits and Amazon ensures the allocation of loans and the customer experience. In addition, corporations avoid the strict regulatory requirements that banks are subject to.

Thanks to the European Financial Guideline PSD2, which has been in force since January, it will be even easier for the tech industry. It requires banks to set up interfaces so that payment service providers can access their customers' accounts. "PSD2 is a gateway for the big tech companies," says KPMG expert Korschinowski.

Advantage Big Data

Apple, Amazon, Facebook and Google have been offering their own payment services for some time now. Billing is often done through credit card accounts. This is also one of the reasons why Amazon is considering its own entry into the banking business, according to the Bain study: The company promises to lower fees. Amazon has to pay the credit card providers on average two percent transaction fees.

The company could save a quarter of a billion dollars a year in the US alone. Another motivation is to gain even more data about their own customers, for example about income and spending behavior.

The seamless linking of enormous amounts of data is an advantage of the large technology companies. "Of course, the buying behavior of their customers is also interesting for banks," says KPMG expert Korschinowski. But they could not access it directly. The technology companies, on the other hand, could better use their data to sell their customers new products and services.

Own currency

This could go so far that Amazon could spend its own cryptocurrency, says Korschinowski. "Then they do not even have to leave their own system."

For Amazon, the technical development of a currency based on the blockchain technique would be easy to master. Capacities are plentiful with the cloud service AWS and the group experience at KI. Blockchain and AI are considered key technologies for the financial industry. This is also suggested by the study "Banking Technology Vision" by the consulting firm Accenture.

But not only the US technology companies could become new competitors in the German banking landscape. The Chinese Internet corporations Alibaba and Tencent are also already offering large-scale financial services in Asia and could, according to the experts, push into the market.

"The Chinese corporations are creating an ecosystem that is as relevant as that of Western corporations, if not more relevant in parts, as the Chinese payment giant Ant Financial shows," says Rieken. Ant Financial is about to go public and is expected to make the company behind Alipay one of the most expensive tech companies in the world.

In Germany, it has not yet been possible to establish mobile payment via smartphone. Corresponding attempts by the mobile service providers have failed. In addition to Alibaba and Tencent, Google and Apple already offer comparable services in many countries. Facebook is experimenting with payment functions on its messenger WhatsApp. A market entry of Google Pay in Germany should be imminent according to media reports.

For the banks and savings banks it will be difficult to find a place in the scenario. If the tech companies dominate the living room via their digital assistants and they succeed in establishing mobile payment via smartphone in Germany too, only a few niches remain in the private customer business for the institutes. One thing seems certain: if they are not constantly developing technologically, they will lose the race.

In summary: The German financial industry expects a market entry of the large engineering groups. Amazon, Google and Co. could dig up customers via new devices like smart speakers to the institutes. Nor can they rely on the great confidence their customers place in them. But in the long run, they have to get involved in the technological arms race.



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