With the boom of new fintechs entering the market over the past decade—driven by widespread financial exclusion in various economies and a growing population underserved by traditional banks—large financial institutions initially dismissed the trend. However, they soon shifted their focus to fending off this new wave of competition, particularly in the retail sector. But while they were busy countering fintechs, they may have overlooked an even bigger disruption: big techs.
From the very beginning, Amazon naturally had payment solutions and financial products to support its sellers, given its e-commerce nature. However, the game changed when big techs realized the vast potential of a consumer market eager for more technology and seamless financial experiences. In late 2014, Apple Pay marked a turning point, revolutionizing digital payments and signaling Silicon Valley’s entry into the financial industry.
This first B2C solution allowed users to make contactless payments using iPhones and Apple Watches, seamlessly integrating with their existing credit and debit cards and reducing friction in everyday transactions. As expected, others quickly followed: Google Pay and Facebook Payments (before Meta’s rebranding) both launched the following year. More recently, WhatsApp leveraged its over 2 billion users worldwide to introduce WhatsApp Pay—though not without resistance in highly regulated markets such as India and Brazil.
Products and Services
Today, big techs’ financial products are far more sophisticated. They have played a major role in popularizing BNPL (Buy Now, Pay Later) and other deferred payment models—once primarily associated with less developed economies, where credit is a necessity and default rates are high. While initially focused solely on payment processing, big techs are now increasingly developing their own financial products, often in partnership with banks but gaining more autonomy over time.
Big techs typically form direct lending partnerships with banks, allowing consumers to access credit through a tech company’s digital platform. In these agreements, banks provide the funding and facilitate loans, while the tech firm markets the credit product and collects user data. Depending on the structure, the loan may remain on the bank’s balance sheet or be repurchased—fully or partially—by the tech company, sometimes with risk indemnification for the bank.
Coming Soon
However, some big techs are also obtaining their own financial licenses, allowing them to issue credit independently. For instance, all nine major tech firms analyzed in a recent study had subsidiaries with payment licenses, enabling them to provide payment services and/or issue electronic money.
At first glance, the entry of big techs into finance seems to enhance market competition and empower consumers. In practice, however, it replicates the same user control model seen in other digital industries—but with even greater risks due to data collection and usage. Transparency is also a major concern. Consumers who take out loans or other financial products from tech firms often don’t fully understand whether they are dealing with a bank or the technology company itself. This lack of clarity can create confusion about whom to contact for issues and what legal protections apply in case of disputes or litigation.
Other risks include consumer protection gaps, such as delays in dispute resolution, misleading representations about deposit insurance, and unfair or deceptive practices. Users may not realize that funds held with a tech company might not be covered by deposit insurance, exposing them to potential losses if the firm collapses. Additionally, they might be unaware that access to their funds depends on third-party services, which could introduce further vulnerabilities.
