Bankers' greatest fear is that big tech moves into banking. That reality may have just moved closer, writes Brian Caplen.

Facebook founder Mark Zuckerberg may regret the day he supported the idea of more regulation and higher taxes for the tech sector. Margins will be squeezed if tech companies have to create bank-like compliance departments at the same time as paying higher taxes.

But bankers should also be worried about where all this might lead. Their biggest fear in the race to become digital is that a big tech company will step into the banking sector and compete head on. Already there are lots of examples of big tech starting to make inroads into finance, including Facebook’s Libra currency project. Meanwhile, Goldman Sachs is talking to Amazon about offering small business loans to the tech firm’s US customers, and Apple has launched its own credit card together with Goldman Sachs.

Bankers have always argued that what would stop a tech company becoming a full-service bank is the panoply of regulations and requirements that would come along with it. But if the tech sector starts to become more regulated does this change the calculation as to whether obtaining a banking licence makes sense?

The big tech companies are no longer the new kids on the block and their years of easy profits look like coming to an end. This will make them start to consider moving into other sectors where they perceive a competitive advantage. Banking may start to move higher on that list. 

Brian Caplen is the editor of The Banker. Follow him on Twitter @BrianCaplen

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