In the early 2000s, Walmart tried to start a bank. It was a well-trodden path; even rivals like Target had done it. And yet hackles were swiftly raised. States passed laws to ban would-be Walmart branches. Talks with regulators languished. Members of Congress drafted a bill that would ban retailers from banking. It was a matter of both scale and trust: whether the nation’s retail conqueror should be allowed to roll into yet another industry and potentially dominate it. In the end, after nearly a decade of trying, Walmart bailed on the attempt.
“We don’t plan to do this again,” Jane Thompson, Walmart’s president for financial services, told The New York Times at the time. “The bank is behind us. We will use our partners to roll out new products.”
As big tech companies dive deeper into banking, it’s a cautionary tale—and also a playbook.
On Wednesday, Google confirmed reports that it would begin offering checking accounts next year, the latest in a recent volley of tech ventures targeting consumer finance. Uber, under the moniker Uber Money, wants to be a bank for its drivers (and maybe riders too). Apple has an indestructible credit slab. Facebook (sorry, FACEBOOK) just announced Facebook Pay—Venmo basically, except Facebook gets all the transaction data for ads. (Not to mention Libra, its attempt to build a global cryptocurrency payments network.) Amazon, like Google, has reportedly explored checking accounts of its own.
Which makes sense. The inexorable gears of profit appear to be slowing for US tech. Facebook warned investors last month of coming “headwinds” in digital ad targeting. iPhone photos can only get so much crisper, Amazon’s shipping that much faster.
The US tech firms need only look to Asia for a lesson in how a push into banking can accelerate their growth. There, tech firms plowed into finance years ago and largely won out. In Beijing, it’s embarrassing to pull out a credit card rather than a QR code that links to your WeChat account. Ant Financial, the banking arm of Alibaba, is far bigger than Goldman Sachs, the bank that helps Apple issue its credit cards. On the same apps you use for news and games and texting, you can also get loans, credit, and manage your investments.
"All of these players have quite bold ambitions to be the center of everyone’s life."
GERARD DU TOIT, BAIN
While the US hasn't gone that far, a symbiosis does exists between popular platforms and personal finances—a little toxic, maybe, but clear. Tech firms can deliver financial services right where and when they’re needed, says Gerard du Toit, a banking consultant at Bain. Part of that is, yes, data: Google and Facebook know about your recent breakup. They know that a baby is due, that the kids just started college. They’d probably love to help finance every step of the way, and collect even more data in the process. But new sources of revenue aren’t the main focus right now, Du Toit says. Instead, tech companies want to lock you even more securely into their existing business models—keeping those well-proven profit engines humming. If you thought iMessage kept you tethered to the iPhone, get ready for when your financial life revolves around Apple Pay. “All of these players have quite bold ambitions to be the center of everyone’s life, where you just can’t imagine breaking up with them,” he says.
Getting there won’t be so easy. Tech is under more scrutiny than ever, and banking brings strict regulations and an opportunity for political intervention. Facebook is learning that the hard way with Libra, even sparking a House bill that would, you guessed it, keep big tech out of finance. The project already faces an antitrust inquiry from European Union regulators, and US officials have called it too-big-to-fail. “There are very few companies that actually want to be banks,” Du Toit says. (Facebook remains adamant that Libra is not a bank and won’t become one.)