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Big techs are known as a bigger version of fintech. Fintech aims to innovate finance with technology in business models, applications, various products, and processes. Fintech is usually limited to the field of finance, but big tech has broad dimensions. They also provide financial services and other services that are the prime focus.
The leading big tech business is in information technologies and consulting that counts for up to 47%. Their financial services are limited to up to 11% of the total. In the financial sector they make connections with various banks and at times compete with them. The main focus is to deliver primary financial services to their customers.
The emergence of big tech in Finance
We can not forget the fact that most of the big tech companies like Facebook, Google, Alibaba, Amazon have come into existence from the last two decades with the development and advancement in technology. With time people started having access to the internet and it is since then the big techs are continually evolving.
If we talk about the present date scenario, most people have access to smartphones and the internet, and in this busy world, people prefer to choose big tech companies that ease their solutions. Every big tech company has experienced a sudden boost in the time of the pandemic. People were reluctant to step out of their homes and therefore preferred to rely on various big techs.
Big techs are directly connected with numerous people. It has user data that helps in providing a vast range of its services. Using the advantage of the large set of data, big techs planned to step into the financial markets that will involve various payment activities, loans, and insurance policies. The big tech enormous start in the finance industry holds the capacity to bring a considerable change in the society.
Big tech’s minimum cost business can provide financial services in the various fields where the vast majority of the population is unbanked. Utilizing the network data big techs process, they can evaluate the risk of borrowers. Thus helping them by reducing security assets while giving loans to the individuals. Working effectively in big tech can change the flow of financial activities and advance the financial insertions to permit growth in economic activities.
One of the very first activities offered by different big techs was payments assistance. The main motive behind this was to gain public trust and attention in the initial days in E-commerce. Even today, people want delivery of various goods, but sellers allow it only after confirmed payments. In the initial days, services like Alipay and PayPal came into existence and were successfully merged with e-commerce platforms to provide better payment options to the buyers. And with time these services proved to be an alternative to other payment means like credit or debit card.
Today we have access to mobile payments such as Amazon pay, google pay and all these have eased the payment procedure. The big tech here collaborated with various banks to provide these services. Big techs have created various inroad options for the people who have direct access to mobile phones and other means of payment are limited. Every economy in the world is planning to go completely cashless, and all these ideas started with the big tech’s financial inclusions. Various big techs are working to provide real-time transfers at very low costs.
Money market funds
Big tech often uses its high reputation and name to provide money market funds and various insurance policies to its customers. Big techs usually are a one-stop destination for all kinds of work and that makes them more reliable and fast compared to other financial bodies.
Big techs have their unique payment platform like amazon pay, and people usually keep some amount of money in it. To engage customers to use that money, they offer short time investments in the form of money market funds. These funds are either managed by companies linked with big tech or a third party. Big techs keep a record of the investment and withdrawal patterns of their customers. And that helps to maintain the money market funds liquidity. Thus they can offer customers instant investment options.
Most of the big techs look forward to providing credit lending to their customers and small business. It usually offers low credit lines or small loans that have a maturity of about a year. The amount of loans also varies from country to country and reflects the unevenness in the different economies.
There are various options through which big tech can expand its credit distribution. Like setting up an online bank, but some countries do not permit doing so. The other is to collaborate with a leading bank. This can be beneficial for both the bank and the big techs. Big techs can quickly approve loans and provide data analytics by using various technologies and the bank has to raise the fund while managing loans
We must have a question within our minds: Why have big techs entered into finance?
Big Techs have entered finance only after achieving huge success. They had a strong customer base and brand identification when they stepped into the financial market. Their activities possess correlation within the financial and non-financial domains.
Financial services can strengthen the big tech community and help them in attracting a considerable audience. Big techs can access data either by using social media or any search engine and optimize their plans according to customer attraction. There are various banks to provide financial services but they are not as fast and advanced as big techs are. Customers are more attracted to big tech’s functioning and also because they have faith in them.