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Silicon Valley start-ups are targeting fintech as their next phase of disruption. Business has become even more aggressive than ever before. Dynamics shifts to accommodating the young generation in particular, through big technology finance.

The benefit with fintech is the ability to create a seamless hassle while purchasing and paying for goods online.  Apple recently became the most valuable company in the unicorn list after it hit a trillion dollar valuation.

Armed with goals of innovating technology to a customer friendly and sleeker future, industry experts wonder whether the technology giant will do more with financial technology? Or rather contribute significantly to the fintech industry.

GBH Insights Chief Strategy Officer Daniel Ives highlights that most tech giants have shifted much more aggression into banking. At the same time, these companies have been trying to grasp consumer lifestyle. And therefore delving into financial mechanism has helped them gain actionable insight on consumer spending.

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Ben Elliot of Bloomberg Intelligence compares the lure of financial data as a means for merchants to have a broader view of a customer’s wallet. In a 2018 Memo by Apple Inc, CEO Tim Cook reported how Apple Pay transactions tripled within a year and hit more than  $1 billion. According to a data intelligence firm, this figure was high compared to numbers reported for PayPal and Square mobile transactions. Cook said:

“Financial returns are simply the result of Apple’s innovation, putting our products and customers first, and always staying true to our values.”

After the introduction of the iPhone back in 2007, Apple introduced Fintech.  The technology world then viewed the iPhone as a game-changer. Subsequently, this will result in the introduction of the payment system. Apple Pay took advantage of the near-field communications (NFC) technology, which was previously operated by banks and provided a contactless means of payment through smartphones.

The Bank for International Settlements prepared a report entitled, “Big Tech in Finance: Opportunities and Risks; sought to quizzically address the question of whether big tech companies had more advantage in the banking sector. This report denoted consumer data and analytics as a significant byproduct of big company’s operations.  Fears of an emergent invasion by corporations such as Amazon and Apple into the banking space has attained a fever pitch.

The overarching trend has been to forge alliances between Wall Street payment firms and the Silicon Valley giants. However, if Amazon could steal from PayPal’s Venmo sites or run a payment retailer, it would likely be able to gain market share from existing payment processors such as Mastercard and Visa.

Following increased regulatory scrutiny, Facebook’s Libra today decided to go the digital payment processing way. Libra is now considering having digital versions of established currencies such as the Euro and the Dollar. It is now clear, more than ever that the slice of pie for traditional payment is attracting the attention of Silicon Valley unicorns.

Amazon, for instance, has been deliberating on an Alexa enabled car that one could pay for gas using their voice. Likewise, Samsung and Google have already rolled out payment platforms.

The big question, in this case, is why these companies are so eager to join the digital payment sector. Let’s take a look at the Big Tech data report on finance.

Financial services are only a small part of their business globally, but due to their size and scope of customers, the introduction of large tech companies into finance has the potential to cause a dramatic change in the industry. Big tech’s low-cost structure sector can be quickly scaled up to provide basic financial.

Using big data and analysis of the network structure in their established platforms, big techs can assess the riskiness of borrowers, reducing the need for collateral to assure repayment.”

Key takeaways include:

1. Low Cost Structure – an efficient business platform requires effective logistics management, Integration infrastructure, and distribution layers. Take Amazon’s platform business for instance, and see how this investment in the network has catered for its growth.

2. Fintech services could be a small part of big technology companies’ offerings, yet the financial services of these companies are not small – S&P Capital gave an 11% estimation of the revenue generation of big technology corporations’ financial services. You wouldn’t ignore the value of eleven percent on an ecosystem boasting hundreds of millions of users.

3. Relevant data | and not just big data  – Amazon has been able to issue huge amounts of cash advances through its merchant cash because it was armed with two important bits of information: (1).Revenue inflow to the borrower. (2).Revenue inflow to borrower’s industry segment.  Big tech company’s access to relevant data has enabled them to remain on track with consumer lifestyles.

Meanwhile, the invasion of big tech companies into the banking space seems relatively driven by market theatrics. The interplay of online consumerization rather than the emergence of technologies such as AI and Blockchain. However, they too had a major role to play and in the near future-maybe most unicorn companies will grow to a trillion valuations and those currently holding positions will triple. You never learn why.