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Amazon or Facebook: Which Can Disrupt Banking Sector Faster?

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The banking sector is on the verge of a massive disruption as tech giants Amazon (AMZN - Free Report) and Facebook look to foray into this market. Equipped with massive amounts of consumer data and advanced artificial intelligence (AI), machine learning and deep learning techniques, these technology giants have the power to change the playing field.

The massive database provides useful insight into consumer behaviour, spending and saving pattern, and most importantly their preferences regarding financial services.

Customers are now preferring fintech applications rather than visiting a bank for their financial needs. Further, in the growing era of data security, the financial institutions are becoming highly reliant on cloud based infrastructure, consequently raising the demand for cloud services.

This trend in turn benefits the cloud service provides like Amazon Web Services (AWS), Microsoft (MSFT - Free Report) Azure, Google Cloud, IBM Cloud and so on.

Amazon’s Aggressive Stance

Amazon has been eyeing the banking sector for some time now. The company already benefits hugely from the dominance of AWS in the cloud market. Notably, it has several financial institution customers like JP Morgan Chase, The Carlyle Group, and Capital One.

Now the e-commerce giant has set its eyes on commercial banking. Notably, Amazon already has an exposure to the banking sector in terms of customer payments via the mode of debit or credit cards.

Reportedly, Amazon is now in talking terms with J.P. Morgan Chase in order to create a checking account for the customers, focussing more on the millennials and the ones who don’t have any account. This will give the e-commerce giant a potential entry to the online banking services space.

Moreover, a checking account would help it to provide further benefits to Prime members, thereby improving traffic on its e-commerce platform.

Further, Amazon’s strong focus toward the advancement of the AI skills of its voice assistant Alexa might actually foreshadow the company’s plans to turn it into a financial advisor for the people. It already has the ability answer economic questions thanks to a partnership with UBS Wealth Management.

Alexa is already in use by Capital One and Liberty Mutual. These organizations allow their customers to pay bills, check balances and track their transactions using Alexa.

Recently, the company forayed into wealth management space by collaborating with Fidelity Labs and launching a digital financial advisor called Cora, which is based on augmented reality (AR)/virtual reality (VR) techniques.

Per the recent survey conducted by LendEDU, 49.6% of respondents were open to Amazon savings accounts, while 50.3% showed interest in Amazon for personal loans.

Further, 38.3% of respondents consider Amazon to be equally capable as banking institutions in handling their finances and 17% believe Amazon is more trustworthy than a bank.

Amazon sports a Zacks Rank#1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Can Facebook Outsmart Amazon?

However, it would be foolish to ignore Facebook’s advances in the sector. The social gaint has been approaching the banking institutions since last year to improve the user engagement on its platform further.

Brazil’s Banco Bradesco created an application with the help of Facebook. The application allows the bank customers to avail banking services via Facebook.

Per Wall Street Journal, the company has been trying to convince JPMorgan Chase, Wells Fargo, Citigroup and U.S. Bancorp in order to share their customers’ information related to checking account, card transaction details and much more.

With the aid of this information, Facebook strives to send alerts related to fraudulent activities to its users. Further, the company will be showing the users their checking account balances via its Messenger application.

All these will help the company penetrate the banking sector and also provide it competitive edge against the other tech giants which are also putting in concerted efforts to enter the sector.

However, Facebook’s strategy of providing financial information to its users faces data privacy challenge and this remains a concern to the users as well as the banks.

Nevertheless, the company has assured that the financial details will not be share with the third parties.

Facebook, Inc. Revenue (TTM)

 

Facebook, Inc. Revenue (TTM) | Facebook, Inc. Quote

Other Players in the Race

Apart from Amazon and Facebook, there is Apple (AAPL - Free Report) which has partnered with Goldman Sachs and is on the verge of rolling out a new credit card which would carry Apple Pay brand.

This is in sync with the iPhone maker’s strong focus toward increasing revenues from its services business unit.

Further, PayPal (PYPL - Free Report) and Square with their innovative services portfolio remain significant players in the online payment services space with the growing demand for mobile wallets.

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