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Big Tech Giants in Finance: Transforming the Payment Landscape

Jun 4, 2024
Privacy and Security
by Sydney Frenkel
big tech giants in finance

It’s no secret that companies like Amazon, Apple, Google, and Samsung, collectively referred to as “big tech,” have expanded their horizons beyond traditional technology and retail sectors, having ventured into the world of finance. These companies offer innovative payment solutions that change the way digital transactions are conducted. Let’s explore the convergence of technology and finance, examining how these big tech firms are reshaping the digital payment landscape.

The Rise of Mobile Wallets

The emergence of mobile wallets has revolutionized the way we make payments. Roughly 4 in 5 Americans (79%) use mobile payment apps. These digital wallets allow users to make contactless payments in stores, online, and within mobile apps, reducing the need to carry physical cards or cash. Among the most prominent players in this space are Apple Pay, Google Pay, and Samsung Pay.

Apple Pay

Apple Pay is a widely accepted mobile wallet service that allows users to link credit, debit, prepaid, and loyalty cards to their devices. This convenience extends to in-store purchases, online shopping, and in-app transactions. Users can add multiple cards to their devices but must select a default card for payments.

Google Pay

Google Pay, a merger of Android Pay and Google Wallet, offers users the flexibility to make contactless payments with debit, credit, gift, and loyalty cards. This service is accepted across various merchant categories, including restaurants, grocery stores, and online retailers. Google Pay also offers multiple security options, such as fingerprint scanning and PIN verification.

Samsung Pay

Samsung Pay, similar to its competitors, enables users to make contactless payments in-store by adding up to 10 credit and debit cards to their digital wallet. Additionally, users can include membership and gift cards. However, Samsung Pay is limited to select Samsung devices and is not available on iOS devices.

Big Tech’s Foray into Finance

While mobile wallets have gained widespread adoption, big tech companies are taking their involvement in the financial sector to the next level. In an age driven by data, these tech giants are leveraging their vast user bases and data reservoirs to offer a range of financial services, including payments, money management, insurance, and lending.

In some ways, this always felt somewhat inevitable, but it’s surprising how long it’s taken for Big Tech to disrupt digital transactions and leave Big Finance stunned, seemingly all at the same time. Realistically, the life-share Big Tech firms control has given them the confidence to evolve the way users use their devices for commerce, and offering them the option to finance their purchases with even fewer steps by simply using their devices the way they always have makes their competitive advantage for facilitating digital transactions all the more formidable against traditional payment methods.”

                 – James Weiss, Big Drop’s Managing Director

The Data-Network-Activities (DNA) Loop

Big tech companies have harnessed the power of the DNA loop to drive their financial ventures. They accumulate extensive user data, which fuels network effects and, in turn, generates more user activity. This reinforcing cycle allows them to expand their services rapidly.

Big tech’s foray into finance is a data-driven revolution, where the DNA loop of user data, network effects, and user activity is reshaping the financial landscape.”

                 – Kaity Ayuso, Big Drop’s Business Development Manager

Benefits and Challenges

Big tech’s entry into finance promises numerous advantages. Their low-cost, scalable business models can provide basic financial services to unbanked populations, fostering financial inclusion. Moreover, they use data analytics to assess borrower risk, reducing the need for collateral and enhancing the efficiency of financial services.

However, this transformation introduces new elements of risk and competition. Big tech could quickly become systemically relevant financial institutions, raising concerns about financial stability and consumer protection. Additionally, their dominance in the DNA loop poses data privacy and competition challenges.

In Conclusion

The entry of big tech giants into the financial realm, exemplified by their involvement in payment services, is reshaping the way we interact with money. These tech companies are not merely adapting to the financial industry; they are fundamentally altering its landscape. As they continue to innovate and expand their offerings, the financial world must adapt and evolve alongside them to harness the benefits while mitigating the risks of this transformative era.

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