The Superplatforms are Coming … And They Will Transform Financial Inclusion

10 January, 2019

Original Source: NextBillion

For decades experts have claimed that banks are dead or dying, but they have persisted. However, the entrance of new internet giants or “superplatforms” into financial services may finally spell doom for some traditional financial institutions.

In the 1990s, some expected that large retailers, like Sainsburys in the U.K. or Walmart in the U.S., would strike a deadly blow to retail banking with their widespread distribution networks and trusted brands. But independent, retailer-driven financial services have remained the exception, not the norm. In the 2000s, many predicted that mobile network operators (MNOs) would “eat the banks’ lunch,” especially in developing markets with limited bank presence. In a few countries like Kenya, MNOs have indeed enjoyed a financial feast – but again, those markets have been the exception; for most MNOs, the financial pickings have been slim. More recently, the power of internet-based technologies coalesced into a seemingly mighty wave of fintech startups that were predicted to overwhelm the breakwaters of incumbency; but this has yet to happen and may never. Now, attention is on forms of cooperation between banks and fintechs, much as it was with retailers before them, thereby keeping banks at or near the center of financial inclusion.

However, the internet giants are now at the door or, in the case of China (as discussed below), way beyond the door. This has profound implications for the future of financial inclusion, because their business models differ from financial service providers that have gone before them. Among the large internet companies are superplatforms or “platforms of platforms” that operate across multiple sectors, even if they dominate just one. What makes a superplatform “super” is not just its size – although seven of the largest companies in the world (as measured by market capitalization) are superplatforms (the U.S. giants Apple, Google, Amazon, Facebook and Microsoft, and Chinese counterparts Alibaba and Tencent) – but rather its ubiquity across sectors. Facebook, for example, dominates social networking and instant messaging (outside of China), but also runs a massive online news aggregation service.

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