Tech Giants Are Coming After Banking Profits

WeChat is the envy of Silicon Valley. If you have no idea what WeChat is, it’s the Chinese equivalent of WhatsApp, except that it’s so much more.

What is WeChat?

WeChat users can send emails and texts, transfer money, order food, shop online, make hospital appointments, and much more, without ever having to leave the app.

Chinese bond traders even use WeChat to receive client orders.

As reported by The Economist:

One American venture capitalist puts it, WeChat is there “at every point of your daily contact with the world, from morning until night”. It is this status as a hub for all internet activity, and as a platform through which users find their way to other services, that inspires Silicon Valley firms, including Facebook, to monitor WeChat closely. They are right to cast an envious eye. People who divide their time between China and the West complain that leaving WeChat behind is akin to stepping back in time.

Cashless Society

But what makes WeChat so valuable is its promise of a cashless society. The Economist continues:

Thanks to WeChat, Chinese consumers can navigate their day without once spending banknotes or pulling out plastic. It is the best example yet of how China is shaping the future of the mobile internet for consumers everywhere.

WeChat even provides loans. According to Fortune:

China’s closest equivalent to Facebook, the WeChat social network used by 600 million people, is beginning to offer loans up to $30,000 that can be approved in a matter of minutes. No traditional credit check. No wait.

Amazon Plans to Do the Same

But it’s not just WeChat that wants to encroach on banking profits., Inc. [NASDAQ:AMZN] is planning to do the same. As Bloomberg reports:

Financial institutions have parried the threat from fintech firms by incorporating some of their innovations through partnerships and in-house coding teams, according to McKinsey & Co. In its annual banking report, McKinsey said that the industry needs to continue its digital makeover to protect the up to 40 per cent of revenues at risk by 2025 and prepare for competition from so-called platform companies like Bezos’s

Bezos, the founder and chief executive officer of Amazon, built the company into the world’s biggest online retailer. As he extends Amazon’s reach, the Seattle-based company has had discussions with banking regulators about financial innovation, according to lobbying disclosures reviewed by American Banker. And it already has a small-business lending arm that has doled out more than $US3 billion ($3.9 billion) to more than 20,000 of the merchants on its e-commerce platform.

While it might not be something that happens over the next few months, I suspect banks will be fighting off competition, not just from small fintech start-ups, but also billion-dollar tech giants.


Härje Ronngard,

Junior Analyst, Markets & Money

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Harje Ronngard is a Junior Analyst at Markets and Money. With an academic background in finance and investments, Harje knows how simple, yet difficult investing can be. He has worked with a range of assets classes, from futures to equities. But he’s found his niche in equity valuation. It’s not good enough to be right on average when it comes to investing. The market is volatile and it only takes one bad day to ruin your portfolio. You don’t want to end up like the six foot man that drowned in the river that was five foot deep on average. It’s why Harje is constantly reminding investors of their downside risk here at Markets and Money. He does so by simply asking just two questions.  What is it worth? And how much does it cost? These two questions alone open up a world of investment opportunities which Harje shares with Markets and Money readers. Right now Harje is focused on managing research and investments over at the Legacy Portfolio. An investment publication designed to significantly grow investor’s wealth over time with deeply undervalued businesses. Harje also contributes his insights in Total Income, headed by income specialist Matt Hibbard. Harje loves cash-rich businesses, so he feels right at home amongst Matt’s high yielding income plays.

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