one of the original FinTech companies is making a move into traditional banking according to The Wall Street Journal PayPal is slowly nudging some of its customers to add basic banking features like debit cards and direct deposits to their digital wallets how disruptive will this be to the big ol banks well joining us to discuss this is Alison Clarke principal analyst of e-business and channel strategy professionals at Forrester nice to see you thanks for doing this why do you think PayPal is doing this now well look I think you know their their initial purpose for doing
this might simply be to help the underbanked as we call them those customers that don't have a banking account and banking services to bring them into the digital economy so they can you know pay for digital services like uber and and so on but I think you know they'll be much broader appeal potentially in a much broader play that could be made here and you know if you're a traditional bank this is your stuff of nightmares you know this is this is the thing you've been worried about most if you're a traditional bank and that
is that the tech giants like PayPal and Amazon you know news came out about them a few weeks ago potentially going further into the banking space and offering checky accounts now this is your stuff of nightmares because this is what's truly going to disrupt your traditional business you talk about they're targeting people who don't necessarily have a bank account is is that just young people that are coming into the system I mean I think I can speak very clearly the memory of going into my first bank with my dad to open up my account and
getting a book and I stayed with that bank until today that's how those relationships are formed is there a potential for a new generation to completely disrupt that model here absolutely you know it's new customers coming into the banking system it's other customers perhaps perhaps you know lower-income customers that might not be in the banking system and you know struggle to pay for goods and services that have now moved into the digital space so I think that the disruption definitely at the younger end I mean you know a lot of consumers particularly Millennials think that
all banks are basically the same and you know that old method of going in to the branch to open your bank account with your mom and dad just seems completely equated not just that the products and services that they're getting offered by these banks they haven't changed in many many years they're exactly the same as what their parents have and at the end of the day firms like Amazon and PayPal can come in with new services and your product offerings and the reason why they'll disrupt the market and the reason why the banks need to
be worried is because they can go out and they can add value to their customers above and beyond just the banking product right they can curate experiences that are far broader than just a banking product like Amazon I mean imagine a checking account that also comes with great Amazon Prime benefits I mean gosh that's a bank account I'd want to take out and I think a lot of consumers be there younger and older consumers would as well it certainly add a lot more value to than what you're getting out of your bank right now no
the first thing we're going to hear from the big banks is these guys don't even have a banking license are they are they legally allowed to do this exactly they can and the reason is that they don't need they've never needed a banking license I think some of the traditional firms think their business will be protected for a regulation but the reason why they don't need a banking license is because all they need to do is partner with a bank that is willing to offer that underlying product for them and what they then do as
a tech giant at the front end is merge that and integrate into their existing platforms and experiences and that's the difference they'll curate a better experience for their customers than the traditional banks will and I think part of that comes from the fact that a lot of these tech giants and a lot of these kind of you know like PayPal or these you know old startups or even new startups they are laser focused on the end consumer and the customer and the broader needs of those customers whereas traditional banks they might say that they're focused
on customers but they really are still very much product silos they're still you know focused on churning out product and and and making their fees through those underlying products business models I look at the the relationships they have with these banks I think it's like your checks would be cashed out of a bank in Georgia and they get loans out of a bank in Utah and your checking account your debit card would come from a different bank in Wisconsin you might be in a fourth state traveling to a fifth state is some regulatory concern about
like I mean the technology makes it all look quite integrated is there concern in having that many different parts to this especially if the entity itself isn't regulated as a bank look you know I'm sure the regulator's will look at this and see what the concern is but at the end of the day what I think will happen is you know these products will be serviced too by the banks there's no real difference than if somebody came up came along and white labeled a product now you know even for like a store card or something
like that there's no real difference to that particular model I think that sure the banks that are underpinning the offering of Amazon I mean they will need to make sure they've got the right licenses in different states particularly here in the US where it's so it's so it's so different but at the end of the day is a customer you don't care as long as the banking does what you need it to do you don't care it'll probably feel a little bit like it's Amazon if you're aligned or to PayPal if you're aligned with those
particular brands they don't care I mean even here in the US I think a lot of consumers that use venmo for example don't realize that it's owned by PayPal part of it's about the branding and the experience the front end I think the the back end will sort itself out and it you know they can curate multiple multiple vendors and multiple banks in the background yes all right we're gonna have to leave it there fascinating shot though I really appreciate you doing this Allison Clark a principal analyst of e-business and channel strategy professionals at Forrester
