Big Tech is moving further into conventional financial services. Banks must consider how to respond, writes Brian Caplen.

Banks’ biggest fear – the march of Big Tech into their space – has moved a step closer with the announcement of the impending launch of an Apple credit card. True, the company was already creating waves with Apple Pay, its digital wallet and mobile payments application.

But a wallet is a new technology and so not as obviously undermining to an existing financial services franchise as a new credit card. This begs the question as to where Apple could head next. If the next move is into deposits, then the reshaping of the existing banking structure will be under way on a scale that makes the fintech encroachment seem marginal by comparison.

Apple has some big advantages in the credit card business – its existing strong brand name, its track record for sleek technology and its reputation as a steadfast company. Critics have complained that there is nothing game changing about the Apple credit card in the manner of, say, the iPhone or the iMac. But it’s the combination of different existing elements and the jettisoning of consumer-unfriendly aspects such as late payment charges (the Apple card will just continue to apply interest) that will help it to fly.

Apple describes it as "a credit card designed for iPhone" with real-time views of spending and organised in colour-coded categories such as food, entertainment, etc. There is also a cashback feature on purchases that is credited daily. Apple is partnering with Goldman Sachs as the issuing bank and Mastercard for its global payments network.  

How should banks respond? The smartest will be thinking about tie-ups with other Big Tech firms. But opportunities are limited and for most banks working with fintechs and building out their own digital platforms – to ensure that customer experience is as smooth and up-to-date as possible – is the best defence they can mount. 

Brian Caplen is the editor of The Banker. Follow him on Twitter @BrianCaplen

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