The Economist - USA (2019-11-23)

64 TheEconomistNovember 23rd 2019

1

T

he annualWeb Summit in Lisbon each

year is Woodstock for geeks. Over three

days in November, 70,000 tech buffs and

investors gather on grounds the size of a

small town. Rock stars, like Wikipedia’s

boss or Huawei’s chairman, parade on the

main stage. Elsewhere people queue for 3d-

printed jeans or watch startups pitch from

a boxing ring. Money managers announce

dazzling funding rounds. Panellists pred-

ict a cashless future while gazing into a

huge crystal ball. A credit-card mogul dish-

es out company-coloured macaroons.

Yet the hype conceals rising nervous-

ness among the fintech participants. After

years of timidity Big Tech, with its billions

of users and gigantic war chest, at last ap-

pears serious about crashing their party.

“It’s the one group everyone is most scared

about,” says Daniel Webber of fxc Intelli-

gence, a data firm. Each of the so-called

gafa quartet is making moves. Amazon in-

troduced a credit card for underbanked

shoppers in June; Apple launched its own

credit card in August. Facebook announced

a new payments system on November 12th

(its mooted cryptocurrency, Libra, how-

ever, has lost many of its backers and will

face stiff regulatory scrutiny). The next day

Google said it would start offering current

(checking) accounts in America in 2020.

Individually, each initiative is relatively

minor, says Antony Jenkins, a former boss

of Barclays, a bank, now at 10x, a fintech

firm. But together they mark the accelera-

tion of a trend that could reshape the fi-

nance industry.

The gafas have long had an interest in

finance. Yet until recently they focused on

payments, each in its own way. Apple Pay

and Google Pay are digital wallets: they

hold a digital version of cards but do not

process transactions. Neither charges mer-

chants a fee. They simply store everything

in one place and make payments more se-

cure by masking customer details. Google

collects transaction data; Apple does not.

Otherwise holding a phone over a contact-

less terminal is the same as tapping a card.

Facebook Pay stores card details for use

on the group’s various apps (Facebook,

Messenger, Instagram and WhatsApp) so

customers need not enter them every time.

Amazon Pay does the same, and also saves

card details for payments on partner web-

sites. Uniquely, it “processes” payments, a

task others leave to specialist firms. When

a purchase is made through Amazon Pay, it

asks the card issuer if there are sufficient

funds. If the answer is yes, the shop re-

leases the goods (the money itself generally

moves at the end of the day).

What these systems share is their limit-

ed success. After eight years Google Pay has

just 12m users in America, a market of 130m

households. Only 14% of the country’s

households with credit cards use Apple Pay

at least twice a month. In October the num-

ber of customers who used Amazon Pay

was just 5% of the number who used Pay-

Big Tech and banking

Plug and pay

LISBON, LONDON AND SAN FRANCISCO

Tech giants with a trust problem take aim at the world’s most sensitive industry

Digital dough

Creditissuedbytechfirms

Selectedcountries,2017,%

Sources:CambridgeCentreforAlternativeFinance

andresearchpartners;BankforInternationalSettlements

BigTech Otherfintech

100806040200

Britain

United States

Mexico

France

Japan

China

Brazil

Argentina

South Korea

Total fintech credit

per person, $

110

126

1.2

9.3

3.4

372

0.9

1.5

116

Finance & economics

65 TheVatican’smurkyfinances

66 Asia’ssurplussavings

67 Buttonwood:MarketsandAI

68 Europe’sbankingdisunion

68 Climate-dataanalytics

69 Tradingcurrencies

70 Free exchange: The best an

economist can get

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