Can corporates change consumer-facing finance?

Have you noticed that more and more traditionally non-financial companies are offering consumers financial solutions? It’s a new way of transacting and banking that’s been heavily influenced by the rise of financial technology. But how sustainable is the idea of replacing the old guard of banking with corporate entities?

The rise of corporates in consumer-facing finance

Firstly, it’s not about replacing all of the banking institutions, because most new-wave financial products still rely on them — Visa and Mastercard collectively held almost 98% of their market share in South Africa in 2021. Instead, this article focuses on how businesses can offer their clients better ways to bank and transact.

Traditionally, banks and financial institutions have been the main players in this sector. However, with the rise of technology and the growing importance of customer-centric approaches, corporates are increasingly entering the consumer-facing finance space.

Let’s look at one of the most recent moves into the bigger financial space, Apple Inc.

Apple's entry into the market

In 2023, Apple Inc, a technological giant known for the Mac and iPhone range of consumer products, partnered with Goldman Sachs Bank USA, to launch Savings. This new addition to Apple Wallet allows consumers to save money and earn interest.

The interest rate for the account is set to 4.15% per annum, which is comparable to Capital One 360 and Marcus by Goldman Sachs, though, slightly lower than CIT Bank (4.60%) and Bask Abk (4.85%). However, this figure indicates that Apple is serious about competing in the savings market.

It must be said that Apple is no stranger to the finance sector. The company initially started with Apple Passbook in 2012, which allowed users to store passes, such as student IDs, boarding passes, event tickets, and store cards, on iOS and watchOS devices. This was later renamed to Apple Wallet in 2015 and allowed users to store credit cards, prepaid cards, and debit cards for use with Apple Pay, a mobile payment service.

This transition into the financial market has yielded overwhelmingly positive results for Apple. According to Techjury:

• Since launching in 2014, Apple Pay accounts for 43.2% of mobile payments in the US.
• There are 38 million Apple Pay users in the US.
• 51% of global iPhone users have enabled Apple Pay.
• Apple Pay was utilised by an impressive 73.1% of Gen Z mobile wallet users to complete in-store purchases
• Over 40 000 Coca-Cola vending machines accept Apple Pay as a payment method.

With those statistics, it makes sense that the iMac manufacturer launched an additional financial product.

Now that we know the impact that a financial product can have on a corporate entity, we need to look at how the move actually benefits the consumer.

Why will customers embrace corporate-led financial products?

As stated above, non-financial entities can see a boom in their bottom line when adding financial offerings to their product line or services. But why would consumers actually use these services over traditional banks?

Here are three key reasons why end-users would choose consumer-facing corporates for their financial needs:

1. Convenience – corporates can offer consumers convenient financial products and services that are integrated with their existing offerings. For example, Amazon offers its US-based customers an Amazon Rewards Visa Signature Card. With it, customers earn 3% cash back on all Amazon and Whole Foods purchases, do not pay any fees on foreign transactions, and have access to all of Visa's benefits without paying a yearly fee. The cash-back incentive not only guarantees that consumers will keep transactions with Amazon, but that its users will gain an additional benefit over other card options when doing so.
2. Innovation – sticking with retailers, they have the opportunity to offer more innovative services to customers that can be accessed in-store. South African retailer Pick 'n Pay, launched its own savings product called Smart Save, which allows users of its rewards card, Smart Shopper, to save money. It also partnered with Mama Money to offer easy money transfers to over 50 countries, and uKheshe, which enables customers to make payments to anyone without a bank account.
3. Better customer service and access to clients – corporate entities already have pre-established customer service departments to facilitate their existing clients, which would help to ease the burden of establishing new departments. And, the new financial products can be marketed to this customer base for additional growth.

How do corporates begin to launch their own financial services? It all starts with…

Using APIs and trusted partners

Non-financial enterprises have unprecedented opportunities to venture into the financial market by using Banking APIs and forging strong partnerships. The Application Programming Interface, lovingly known as the API, acts as the seamless bridge that connects applications, enabling effortless communication.

The capabilities of APIs extend far and wide, from extracting valuable data from databases to undertaking the most intricate of tasks, such as updating and posting new information. For example, it's possible for a fast-food chain, such as McDonald's or KFC, to launch its own financial offering, or dedicated credit card, to patrons.

Our Fintech infrastructure APIs empower you to construct a bespoke solution tailored precisely to the needs of your discerning clientele, all without undergoing exhaustive upfront development, and an accelerated launch time.