Moody's expects consumer technology giants to be major disruptors in financial services

Moody’s Investors Service expects large technology firms like Google, Facebook and Apple to continue expanding their ability to distribute and offer financial products and services, emerging as significant competitors to traditional consumer-facing financial institutions.

The greatest risk to incumbent financial firms is retail-facing technology giants taking control of customer relationships and distribution of financial products, according to a report Moody’s released on Tuesday. Technology-focused companies can enter finance with products core to their businesses, such as payments, that can create and store value — just as Square did with its Cash App.

As account balances grow, technology firms can easily start offering low-cost index funds, investment advice, insurance and financial planning, the report said.

This would turn existing financial institutions into primarily product manufacturers and lead to consolidation in the industry, especially among mid-market and small, nonspecialized firms.

What remains to be seen is whether financial institutions can successfully evolve before this happens.

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Source: Moody’s expects consumer technology giants to be major disruptors in financial services