So what are you afraid of Tech Titans?

FAMGA (Facebook, Apple, Microsoft, Google, Amazon) dominate vast swathes of the technology universe.  They literally touch the lives of billions of people around the globe all day long.  They are ferociously innovative and house some of the brightest minds on the planet across domains.  They are literally sitting on hundreds of billions of dollars of cash and generating truckloads more every passing day.  They have oodles of risk taking ability and yet…

… and yet they all seem to collectively shy away from the biggest and grandest prize of all – the big M – Money. From early history money has risen to replace barter and occupy a central position in nearly every transaction.  It is usually one half of every single trade/ investment/ commerce transaction entered between humans, machines and organizations.  It is the unit in which humanity measures its efforts, rewards, wealth and debt.  Institutions have arisen over hundreds of years which help citizens deal with money and trade.  Given the nature of money these institutions deal in trust and have been blessed by governments of the day via licenses, regulation, protection etc.

Money, given its very nature, has easily got digitized; technology permeates everything in finance – be it payments, lending, borrowing, savings, investments, ownerships, records – technology is king.  Many banks and institutions insist on being called “technology” companies as investors look favorably on those companies and as a reflection of the nature of money business.  Banks’ technology budgets now constitute a lion’s share of their spends - both opex and capex.  Still the technology capabilities of banks are distinctly limited compared to those of FAMGA like technology companies.  Their consumer facing applications, their UI/UX designs, websites, their AI and machine learning capabilities etc come across as clunky, dated, ponderous and slow creatures from a couple of generations earlier.  Consumers switching apps from say a Facebook/Amazon to a bank website prepare themselves for a slog back through time…

Internet and ecommerce has upended several industries in the past 3 decades e.g. books, music, hotels, travel, transportation to name just a few.  As a digital “native” and as one-half of all e-commerce transactions, one expected technology companies to play a much bigger role in the finance space either in payments or funneling funds from savers to borrowers or enabling business processes in between.  However, that has not come to pass.  Most technology companies end up providing some nature of products to banks eg. Operating systems, databases, messaging infrastructure, office productivity suites etc.   Technology companies seem to be keeping a distance from the core finance/ banking world.  All disruptive innovation is being carried by anonymous folks a la Satoshi or by small, (relatively) little funded startups. Almost as if there is something holding them back; almost afraid of something…

Banking/ finance business needs Capital, Capability, Credibility and Loyalty of customers.  Big technology companies have these in ample measures.  Arguably, the technology titans have more capital (sitting as liquid assets all over the world); technical, commercial and legal capabilities; credibility in the form of brand value and trust; and customer loyalty than many banks discredited over years of questionable management action and behavior.  

Surprisingly, Chinese technology majors seem to be straddling their industries and finance more easily than their western counterparts.  Will one of the western technology titans make a move towards this sector or will they watch the fintech revolution swirling all around us from the side-lines?  It would be interesting to understand the dilemma/complexities facing technology executives as they debate a foray into the financial world.