About three
weeks ago, Facebook has obtained it's e-money license in Ireland. This was in the
making since early 2014 and it begs the question
whether or not this will mark a big shift in the banking landscape.
Bigtech
going for finance?
One could
argue that the move by Facebook is another of many steps of big tech players
moving into the financial arena and disrupting the financial sector. Where
Google has lead the pact from London (with a license
in 2007), Amazon
chose Luxembourg (license in 2010, passport-out in 2012). With Facebook going
down the same path, could we expect Apple or Microsoft to also set up their
e-money institution?
My guess is
that the bigtech will indeed all move towards some form of e-money license in
Europe. It will allow them a direct billing and payment relationship with their
customers as well as a role in terms of payment provider for their platforms
and services. This is not to say that they will move there fast. If I'm
correct, my Google account payments still do not flow via their e-money
institution but via a normal bank.
Now, if
this happens indeed, will the bigtech further move into financial services or
just stick with digital cash and consumer credit?
Bigtech
won't dive deep into finance
I don't
expect the bigtech to move into full finance for many reasons. We've seen some
of the current players moving still quite slowly and sticking to the
straightforward business of e-money.
Moving
towards other business lines leads to increased complexity and regulatory
burden. Bear in mind that the future revenue opportunities for financial
institutions as a whole are quite limited and not so attractive. Finally,
financial institutions are often held to a higher standard with respect to
maintaining their customers privacy, whereas customer data are the lifeblood
for Bigtech.
Further
move towards less-cash society
The main
impact of bigtech going e-money will therefore be the acceleration of our move
to wards a less-cash society in which strong brands, platforms and retailers
issue their own payment instruments and digital cash. From the outset, Facebook
cash could become a big hit as it has the user base, a regular usage pattern
for its users and the possibility to best integrate it's e-money functions
within their own platform
Only time
will tell whether Facebook is also viewed by the public - reputationwise - as a
partner to be trusted with your money. But we can rest assured that their
offerings will certainly contribute to
a less-cash society.
