BlackRock is worried technology firms are about to know “every single thing you do”

Looking ahead.
Looking ahead.
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The president of BlackRock, the world’s biggest asset manager, is among those who think big technology firms could invade the financial industry’s turf. Google and Facebook have thrived by collecting and storing data about consumer habits—our emails, search queries, and the videos we watch. Understanding of our financial lives could be an even richer source of data for them to sell to advertisers.

“I worry about the data,” said BlackRock president Robert Kapito at a conference in London today (Nov. 2). “We’re going to have some serious competitors.”

If tech companies are in control of payment systems, they’ll know “every single thing you do,” Kapito said. It’s a different business model from traditional banking: Data is more valuable for tech firms that sell a range of different products than it is for banks that only sell financial services, he said.

Kapito is worried because the effort to win control of payment systems is already underway—Apple will allow iMessage users to send cash to each other, and Facebook is integrating person-to-person PayPal payments into its Messenger app.

As more payments flow through mobile phones, banks are worried they could get left behind, relegated to serving as low-margin utilities. To fight back, they’ve started initiatives such as Zelle to compete with payment services like PayPal.

So far, there’s no dominant payment company in the US or Europe. As they jostle for position, firms will sign partnerships with each other to boost market share, but eventually a few winners will emerge before the industry consolidates, said Vivek Bajaj, global vice president of Watson Financial Services Solutions at IBM, which collaborates with Zelle.

Barclays CEO Jes Staley pointed out at the conference that banks probably have the “richest data pool” of any sector, and he said some 25% of the UK’s economy flows through Barlcays’ payment systems. The industry could use that information to offer better services. Companies could alert people that they’re not saving enough for retirement, or suggest ways to save money on their expenses. The trick is accessing that data and analyzing it like a big technology company would. 

And banks still have one thing going for them: There’s a massive fortress of rules and regulations surrounding the industry. “No one wants to be regulated like we are,” Staley said.