Big Tech and the Path to Capital Markets

Finadium

May 2018

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Large technology firms have started to launch retail financial services offerings, from payments to asset management to edging towards banking licenses. These moves suggest a new wave of well-financed and well-connected firms in direct competition with the established financial services industry, who are at the same time clients of these same technology firms.

While big tech has direct access to retail investors, institutional investors in capital markets are a further reach. However, they are not that far away, and there are identifiable instances where big tech has a logical opportunity to provide a range of custody, trading and credit intermediation services to asset owners, asset managers and banks. This could be done as a shadow bank or as a licensed financial services enterprise. The entry point will be by big tech becoming a major first client of their own offering, much as buy-side firms can provide initial liquidity to trade matching platforms.

This Finadium report documents the current state of big tech as a financial services provider to the retail market, then moves to consider the implications of this growth for capital markets. We expect that big tech will enter capital markets; this is just a question of time. More importantly, what should capital markets firms do now to prepare?

Table of Contents

• Executive Summary
• The Value Proposition of Big Tech in Financial Services
• Big Tech in Chinese and European Financial Services
  – China’s Advantage
  – Europe’s PSD2 Opportunity
• Amazon’s Partnership Approach
• Where Big Tech Fits in Capital Markets
• About the Author
• About Finadium LLC