FinTech is Not a Threat to Banks. Telcos, WhatsApps, & Amazons of the World Are [Curated Content]

Elena Mesropyan, LTP

 As of July 2017, WhatsApp counted 1.3 billion active monthly users. To put things into perspective, imagine that the whole population of India or China is active on WhatsApp every month. WhatsApp is a well-known heavyweight in mobile communications, and now, the Facebook-owned social app is armed and ready to storm one of the most important FinTech markets in the world – India. All local players (possibly Remitly, PayU, PhonePe, Paytm) are entering a whole new level of competition with this announcement. Fascinating times ahead!

WhatsApp in-chat payments feature is bad news for digital wallets, payment companies in India

  • Instant messenger WhatsApp is readying an intuitive in-chat payments feature, ahead of a likely December launch in India, that promises to make customer onboarding a cinch. It could be the biggest threat that players in the Indian digital payments ecosystem have faced to date.
  • This will be the first time that WhatsApp is introducing the payments feature anywhere in the world.
  • WhatsApp partnered with the State Bank of India, ICICI Bank, and HDFC Bank – three of India’s biggest banks – to launch the feature.
  • The uniqueness of the WhatsApp payments feature is that a user can make payments without leaving the chat interface just like sharing a contact or location on the instant messenger.
  • WhatsApp’s entry into the space threatens digital wallet companies as the instant messenger counts over 200 million users in India, the largest user base it has in the world.
  • Consulting firm Zinnov estimates that nearly 2 million women sell products using WhatsApp and Facebook, totaling sales of $8-9 billion. This is projected to grow to $48-60 billion by 2022.

Orange moving into banking intensifies the competition in the already-very-competitive banking and tech space. Moreover, telcos are the ones to impose the most interesting challenge as they hold the keys to connectivity. Telcos have always played an extremely important, highly integrated role in users’ lives – everything is tied to a telco, making communication companies critical stakeholders in anything that has to do with providing online/mobile services. Will Orange redefine the landscape and invite other telcos to join the competition?

Exclusive – Orange is the new bank? Telecom giant ventures into lending

  • Telecom giant Orange launches its own bank on Thursday, aiming to win 25% of France’s online banking market by capitalizing on the rising use of smartphones to steal shares from established lenders with inferior technology.
  • The launch has two goals: 1. Push to find alternative revenue streams and retain clients in the face of a price war in the telecommunications sector; 2. Test for the telecoms and banking industry, marking the first attempt in a major developed market by a telecoms company to launch a standalone bank.
  • About 25,000 customers have expressed interest ahead of the launch. The company has 21 million mobile clients.
  • Orange has beefed up financial services across its networks over the past 10 years under several brands, such as Orange Money, Orange Cash, and Orange Finanse in Poland, which uses a platform created by Polish lender mBank.
  • Orange targets 400 million euros in revenues for its financial services unit by 2018, out of which half would come from Africa.
  • “Our ambition is to offer everything. We are a complete bank,” said Andre Coisne, Chief Executive of Orange Bank.
  • From November 2, Orange customers can use an instant mobile payment service as well as a free debit card, current account and savings account. Its online app will also allow users to transfer money via text message to another Orange account, and use Apple or Android wallets.
  • Other products, such as loans and insurance, are expected next year.

As a tribute to what we at LTP have been talking about for some time, FIs have started realizing that FinTechs are not that big of a challenge to their top line and bottom line, but Amazon may very well be.

Banks Need to Fear Amazon’s Finance Ambitions, McKinsey Says

  • The industry needs to continue its digital makeover to protect the up to 40% of revenues at risk by 2025 and prepare for competition from so-called platform companies like Bezos’, Inc.
  • “We thought that FinTechs would provide the chief digital threat,” authors of the report said. Instead, it’s become clear that e-commerce companies such as Amazon and Alibaba Group Holding Ltd. “are reshaping one industry after another, blurring sector boundaries as they seek to be all things to all people.”
  • Amazon has a small-business lending arm that has doled out more than $3 billion to more than 20,000 of the merchants on its e-commerce platform.
  • Banks need to defend their turf. Payments will become the battleground where finance will be fought over the next 15 years.
  • Tech companies will reorder global commerce into ecosystems in which giants provide a variety of products and services through a single gateway.
  • Banks will still have opportunities in this new order because they are trusted by customers and hold vast data sets about retail and corporate transactions. The global banking industry could offset the loss of profits from price competition by partnering with platform companies and generating more revenue from their data. Banks that go further by creating their own platforms could elevate their ROE.

Source: LTP


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