Tech companies in the financial sector

The US House of Representatives Financial Services Committee held a hearing for Libra on the 17th of July and the CEO of Calibra for Facebook, David Marcus, who is one of the key people in Facebook’s Libra project, testified. It seems that the committee members focused much more on Facebook rather than the cryptocurrency. Due to previous scandal, the public trust on Facebook has been affected and these lawmakers are concerned about Facebook’s role in Libra project. The lawmakers see Libra as Facebook’s effort to break into the traditional financial sector and expect other large tech companies are also likely to make similar efforts.

There is always a worry for lawmakers that the technology is advancing so fast that the lawmakers fail to catch up with the technology development. Moreover, lawmaker will always be lagged behind technology development, because lawmaker cannot regulate something which has not happened yet. Lawmaker is always trying to eliminate happening of something bad or too risky, but because lawmaker cannot foresee what is going to happen and eliminate all the loopholes in the current system, it is impossible to eliminating the probability of something happening completely. Then although some are talking about banning tech companies from entering the financial sector, it is impossible to do so and many tech companies have already involved in the financial market, besides Facebook’s Libra. Apple is partnering with Goldman Sachs to launch its own credit card.

Tech companies have much more experience than traditional financial institutions about how to deal with enormous data by using modern technology, especially AI. Moreover, because they are newcomers, they are not afraid of “thinking differently” and we can expect we are going to see something new from these tech companies after they enter the financial market. In addition, we should be able to see increasing competition in the financial market, which is a good thing for ordinary consumers.In China, tech companies like Tencent, Alibaba, are building their IOTs, and they see an opportunities of being financial medians, and people can buy mutual funds from their platforms and many people are saving money with these tech companies rather than traditional banks.