Tech firms still not close to replacing traditional banks

The tech giants of the world such as Google, Apple, Facebook and Amazon may not pose a threat to global banks in the short term but eventually they could disrupt major financial institutions according to analysis from the ratings agency S&P

Payments is the main area in which tech companies could one day come to disrupt financial institutions though the agency believes that this would over a longer period of time.  Consumers trust large tech companies with their payments and the continued adoption of Apple Pay and Google Pay are great examples of how Apple and Google have already begun to disrupt the financial industry. 

S&P's report shed further light on how tech companies could use their existing infrastructure to take on global banks, saying: 

“Although these firms are not posing any meaningful short-term pressure on fee income, we believe that they could leverage their strong customer bases and networks to potentially constrain traditional banks' payment services in the longer term.  We currently do not see competition from tech titans as posing a short-term risk to our bank ratings.” 

Increased regulation could also be a hurdle standing in the way of large tech companies when it comes to overtaking existing financial institutions.  For instance it may be difficult for Apple or Google to lend customers money the way that banks do and if they were to lend, it would likely be to small businesses they already have working partnerships with. 

Europe and the UK are preparing to introduce Open Banking and the PSD2 regulation in an effort to change the way consumers bank and large tech companies could see this as an opportunity to expand their reach into the highly lucrative banking and lending markets though this would likely occur later rather than sooner. 

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