You might think large financial companies with brand equity stretching back into the 19th century would have little to worry about when it comes to disruption. But with much younger tech players encroaching on their territory—from Square to Robinhood to Facebook’s Libra—obsolescence can seem like it’s always just one frictionless transaction away.
Count Jane Fraser among the banking executives who worry that Big Tech companies are “unquestionably going to have an impact” on the financial services industry. During a panel discussion at the annual meeting of the World Economic Forum in Davos, Switzerland, this morning, Fraser, the president of Citigroup and CEO of Global Consumer Banking, said disruption from tech platforms will happen and happen fast—and how it unfolds will be hard to predict.
So what can entrenched incumbents like Citi or Mastercard or JPMorgan Chase do to prevent this existential threat? “I think the common thread for all of us is . . . you have to capture not just the wallet, but you have to capture the heart and mind of the customer,” Fraser says. “That’s the strongest defense against the huge platform player, making sure you’re relevant to your customer at all times.”
“Otherwise, you will become a utility,” she added.
Fraser, who began her career at Goldman Sachs and joined Citi in 2004, says financial services are at risk of letting themselves fade into the role of “dumb pipes,” doing the difficult but unglamorous work of negotiating with regulators and anti-money-laundering compliance while large tech platforms use their brand identities to build up their bona fides and become the effective face of the financial world. Paying for dinner with a sleek new Apple Card, for example, can feel substantially more pleasant to consumers who have a positive association with the company that makes their iPhones. Meanwhile, you won’t find many banks on a typical list of the most beloved brands.
The Davos panel on “banking without borders” focused on the evolving ecosystem of global finance. In addition to Fraser, it also included Hikmet Ersek, president, CEO, and director of The Western Union Company; Lex Greensill, cofounder and CEO of Greensill; and Gilberto Caldart, president, international of Mastercard.
Not everyone on the panel was especially concerned about the specter of Big Tech. Ersek noted that Western Union has recently partnered with Amazon to process cross-border payments in countries where consumers lack those options, a complex undertaking that requires the kind of deep foreign-exchange expertise that comes with Western Union’s many decades of experience.
“It’s all about including people in the financial system,” Ersek said. “[Amazon wants] to expand their services to new customer segments, but many people don’t have credit cards.”
The service was initially rolled out in Peru and offered in 10 countries, but Ersek said the arrangement has worked out so well that Amazon brought it to the United States, where financial access is still a problem for many consumers. “There are people in Tennessee, there are people in Nebraska, they really want to use cash payments or other tools,” Ersek said. “So, I think including everyone is extremely important.”
Of course, Amazon isn’t exactly known for playing nice with potential competitors, and it’s been in the payments-processing business since 2007. Fast Company editor-in-chief Stephanie Mehta, who moderated the panel, asked Ersek if he was “letting the fox in the henhouse” by partnering with Amazon, a question that earned a round of laughter from the crowd.
Ersek played it cool, however. “I don’t think Amazon is going to go with me to Kyrgyzstan to negotiate with the head of the reserve bank,” he said. “Believe me, we built that cross-border business over 30 years.”
Davos Dialogues, a series of editorial panels, videos, and news coverage, is produced in partnership with HCL Technologies.