Google, or Alphabet, may have plans to disrupt the big four ASX banks of Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), Australia and New Zealand Banking Group Ltd (ASX: ANZ) and National Australia Bank Ltd (ASX: NAB).
According to reporting by the Australian Financial Review, the banks may be concerned by the global tech company's growing incursions into the financial space.
Readers may have recently seen that Apple is working on a product that is internally called Apple Pay Later with the help of Goldman Sachs which will provide the lending for the instalments that customers may use, according to Bloomberg.
The newspaper wrote that there are teams in major banks that are trying to predict what the future competitive landscape will be, and that those teams would have been "watching with trepidation" as the big tech companies steadily expand into financial services.
In China, the big tech giants of Alibaba and Tencent have grown from just payments into the world of lending and wealth management too. US tech shares could follow a similar sort of path.
Google's banking moves
The tech giant is reportedly about to expand into banking with a product called Google Plex. It is a name for another big number, but it also refers to the plan to add a transaction account to Google Pay.
Google is partnering with a group of small US banks where they will hold the deposits.
It's possible that Google may not extend these new products to Australia, but the possibility of the tech giant linking up with other banks could be a large competitive threat, according to the AFR.
However, the newspaper said that the tech giants of Apple, Google and other tech giants will "inevitably find changing industries like banking and wealth" to be harder than software or music because of the importance of banks to economies and high levels of regulation.
The masthead also wrote about how, in some ways, it's easier for tech companies to get into the industry:
But the emergence of "embedded finance" – which allows non-banks to hire banking licences and the infrastructure of regulated banks, through 'banking-as-a-service' (BaaS) offerings – means more companies not regulated as banks will still be able to provide financial services to enhance customer experiences.
For traditional lenders, this will make maintaining close and trusted customer relationships paramount. The distribution of financial products in the smartphone era looks very different to sprawling branch networks.
On Friday, each of the big bank share prices of CBA, ANZ, NAB and Westpac all declined.
