This article comes fromMedium, Original Author: Akshit kawatra

Odaily Translator |

Odaily Translator |

Ma Yun once said: "If the bank does not change, we will change the bank".

In fact, in the past few decades, the technology industry has been researching and analyzing the lack of technological progress and inefficiency in the financial industry, which has also led to the emergence of a new industry term - "financial technology" (FinTech). Fintech is an ecosystem that can be supported by both the financial and technology industries, in which technology companies can explore diversified financial services, and financial companies can also use technology to fill gaps in user experience.

Now, this industry combination of "finance" and "technology" has produced many successful cases, such as:

1. Apple Card launched by Apple and Goldman Sachs in the United States;

2. Transferwise (an international remittance service provider) and BPCE Groupe, the second largest bank in France, launched a low-cost international transfer service in Europe;

3. Google also cooperates with HDFC and ICICI Bank, the two largest banks in India, to accelerate the expansion of Google Pay's service coverage in Asia.

Also, in the past few years, a number of well-known banks have also become more generous, investing in many fintech startups, such as:

1. Plaid, a financial technology startup, completed a $250 million financing at a valuation of $2.7 billion, including Goldman Sachs and Citibank;

2. Symphony, an instant messaging service platform, has won the support of many financial giants such as Goldman Sachs, JP Morgan Chase, Wells Fargo, Bank of America, Citigroup, Credit Suisse, Deutsche Bank, etc., to "fight" the Bloomberg terminal;

However, the above-mentioned investment cases and the entire industry need to pay attention to the financial industry giant (Big Finance). Given its political and financial influence, large financial companies are very interested in using Google Pay, Apple Pay, AppleCard, Amazon Card, etc. The products showed great patience and tolerance, they even "greeted" each other with respect and humility, and tried to form a partnership. Why is this? The answer is simple, because none of these previous financial technology products touched the core interests of large financial companies.

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Libra directly stimulates the business model of large financial companies - the flow of money

Banks (at least the consumer finance business) make most of their revenue from credit card transaction fees (typically 2-6%), international remittances, fees charged to merchants for purchases, etc. With the emergence of Libra and the sheer size of Facebook itself will undoubtedly pose a threat to all banking institutions, so technology companies such as Facebook, PayPal, Lyft, Spotify and Uber have actually been doing one thing for years: not charging consumers any transaction fees. Doing so can substantially improve product conversion rates, because by eliminating transaction fees, consumers can pay less, which in turn attracts more users to use the product and stimulates demand, which, at the same cost of sales, makes those tech companies increasing income.

Before Facebook launched the Libra cryptocurrency, the two technology giants Google and Apple tried to fight against large financial companies through Google Pay and Apple Pay respectively, but what they did did not touch the core interests of banks, they just wanted to avoid, Or bypass transaction fees to cut into bank profits. As a result, bank-authorized credit cards are still in use and "must" be supported by the Visa and Mastercard networks. Even for Ripple, one of the largest blockchain companies in the world, their business model is actually interdependent with financial institutions to speed up the speed and efficiency of international remittances without reducing transaction costs.

Facebook is nothing like Google and Apple.

The initial 27 founding members of the Libra Association need to provide $10 million to become a Libra cryptocurrency network node, but you will find that there is no bank among the 27 founding members. Among them, there are Visa, MasterCard, PayPal and other Paying financial institutions, because Libra still needs credit card network infrastructure providers to support their transactions.

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In fact, the banks are already fighting back

Dutch bank ING had contacted Facebook before, but they quickly decided to oppose the Libra cryptocurrency; while Citibank stated that it had never had any communication with Facebook before the release of the Libra white paper. Traditional financial giants like Citigroup or Goldman Sachs basically think Facebook's Libra cryptocurrency is a crazy idea, because they feel that Facebook wants to make Libra a cryptocurrency that competes with the dollar and the euro.

So how will banks fight back? Some in the industry suspect that banks may do the following:

1. First of all, banks will immediately spend huge sums of money to find some government lobbyists. As long as Libra tries to issue in any country, they will lobby the country’s regulators and ask them to set strict regulatory rules to prevent Libra;

2. The bank will also form a "consortium" and form a partnership, and at the same time establish a banking organization that competes with the Libra Foundation/Libra Association. At the same time, banks will also invest in blockchain to gain more "control" over cryptocurrencies and blockchain systems;

3. Banks will pay close attention to the cryptocurrency movements of other consumer technology players, such as Google, Apple and Amazon, to predict whether they may launch Facebook-like products that cut transaction fees in the future.

4. Banks will benefit from their own power and influence to create "conflicts" that hurt big tech companies, such as raising transaction fees for payments via Apple Pay or Google Pay, or making it harder for them to transfer funds in public and private markets around the world.