Professor of Financial Services Innovation
We all know Apple as a tech company. Recently, Apple successfully launched a high-yield savings account on the US market. According to Forbes, more than $1b was deposited into those Apple savings accounts in just a few days. And the company was able to gain the trust of over 250,000 people to start saving at Apple. Is it surprising that tech companies venture into financial services? And what’s the strategic reasoning behind this move? We’ve asked Professor Bjorn Cumps for a full account of the facts. Bjorn is a Professor of Financial Services Innovation and has a passion for FinTech, platforms and business ecosystems.
Why are tech companies moving into the financial services arena?
Bjorn Cumps: “It shouldn’t surprise us that companies such as Meta, Amazon, Alibaba, or Tencent all have a financial services approach. Apple is a strong ecosystem player. At its core, they are a production company, making all sorts of devices such as iPhones, iPads or iWatches. But to complement that core offering, they partner with third parties. This new savings account also fits in with a line of financial products that Apple has already brought to the market. First, they launched Apple Pay, a wallet solution. Next was the Apple Card, a credit card together with Goldman Sachs. They also have Apple Pay Later for those people who shop online and need credit at checkout. And now there’s Apple Savings. So, it fits into their entire line of financial services products.”
The tech giant recently launched a savings account. So does this make them a bank? No, says Professor Bjorn Cumps, but it makes them a brilliant creator of ecosystems.
Are there any risks involved in venturing outside of your core activities?
Bjorn Cumps: “Does Apple have the ambition to become a bank? Of course not. As they are partnering with a bank – Goldman Sachs – Apple does not take any financial services risk. In essence, it is a Goldman Sachs savings account, so they basically shift the risk to a third party. This is what Apple and many other tech companies typically do. They have their own core offering and then they look to other parties for complementary products and services. These products and services are an excellent means to enhance customer loyalty. Apple’s devices are so much more than just a piece of hardware.”
Will we also see this trend in the European market?
Bjorn Cumps: “Today, Apple’s financial services offering is mainly focused on the US. Only Apple Pay is available in Europe as well. And there’s a reason for that. The US is a homogeneous market, which means you can partner with one company and cover the entire territory. That’s not the case in Europe. Banking is still a very local, national business so if Apple wants to launch their financial products in Europe, they will have to partner with each of the different local banks. Financial regulation is different as well. It’s not impossible, as they did it before with the launch of the iPhone, partnering with different telco providers. But it takes them way much more effort compared to the US. Will it come? Possibly, but it will take extra time to build all of these local partnerships.”
Do you see any other upcoming tech trends in the bank sector?
Bjorn Cumps: “A first trend comprises everything that has to do with AI. That’s the move towards more embedded and contextual banking. Making sure that the customer gets the right offer at the right moment. For insurance companies, this means knowing what your specific risks are and at what moment you need to be insured. In banking and financial services, it can be about helping you with the wealth management solutions that you need. In short, it’s about making optimal use of all the data that is available.
A second trend is the focus on Web3 and the metaverse. Banks start to explore crypto wallets and crypto solutions. They work together with central banks on central bank digital currencies. And they also explore how they can play a role in storing digital assets for companies.
And finally, there’s the focus on spatial computing. Apple has recently launched its new AR/VR headset. And there again financial services and tech come together. Because how convenient is it when you have an Apple device on your head that has integrated payments, and your integrated savings account all available within that same Apple ecosystem.”