Issue link: https://recursos.axway.com/i/1321495
53 Open Banking APIs State of the Market Report 2020 AND SOME THE KEY THREATS REMAIN THE SAME It is clear that 2020 marks the true start of the Age of Transformation. Some potential threats have dissipated, while others have come into sharper focus. But there are also two key challenges facing banks that are as strong as ever: the increasing power and concentration of tech giants and the outdated, unprofitable bank business model that has to date remained unchanged for over a century. 20 Tech giants are continuing to consolidate their power. This impacts banks in two key ways. During COVID-19, tech giants have increased their profitability. More e-commerce is routed through Amazon and Google, for example. This impacts on banks because their pool of viable SME customers shrinks as SMEs lose out on revenue to the tech giants. Just as worryingly, and an area that banks seem completely blindsided by, is that the tech giants are coming for their lunch. While some banks enter into partnerships with tech giants, not all banks can do so, but even those that do risk becoming little more than the infrastructure that has lent their license to the tech giant. Amazon, Google and Facebook have not shown a history of supporting their partners in any market. Often, they start with partnerships with established market players. They then use their data-driven capabilities 21 to understand and create rival products that directly compete with their partners. They also lock their partners into needing their platforms for customer relationships and then heavily reduce the terms of the partnership to be in a discordant power balance 22 . There is absolutely no reason not to believe that the tech giants will repeat this pattern with banks. In the meantime, tech giants are also increasing their own financial services offerings. 23 In a digital economy, the traditional bank business model is just not profitable. McKinsey estimates that banks are on track to reduce their economic profitability by just under $1,500 billion. This is because while banks are in the process of expending capital to digitize their processes, they are not diversifying their business models, so the profit being generated after capital costs (the measure of innovation effectiveness) is minimised. • Google Wallet • Google Credit Card • Google Pay • Apple at Work • Apple Credit Card • Amazon Prime Credit Card • Amazon Lending • Amazon Project • Amazon Allowance • Facebook Messenger P2P payments • Whatsapp Pay • Facebook Pay • Libra • Yu'e Bao money market • Ant Fortune • WeChat Pay • Licaitong platform THREAT: TECH GIANTS