Silicon Valley giants are likely to enter the banking sector in 2018, and most banks are unprepared, said Herman Gref, the CEO of PAO Sberbank of Russia, the country's largest bank, on Dec. 14.
Companies such as Amazon.com Inc., Facebook Inc. and Google (which trades as Alphabet Inc.) are already taking income from banks, and competition from them will intensify in 2018, Gref told analysts at a London conference.
"Next year big Silicon Valley players will enter our market. Facebook has already registered [financial services subsidiaries] in two jurisdictions, one of them in Europe," the CEO said, referring to the social media firm's payments arm. "Soon we will see Amazon Finance and Google Finance. I think it will happen next year. ... Everything before this was a warm-up and we need to prepare for that."
Sberbank has been benchmarking its financial results against those of technology companies in 2017, Gref revealed, and it will continue to do so. "We cannot continue simply as a bank," he said. "Sberbank is to an extent already a technology company," he added, pointing to the growing number of computer developers and data scientists it employs, as well as the multitude of online services it offers.
The market share of so-called fintech firms in banking services at a global level is roughly 5% in 2017, but it will climb to 17% in 2023, he estimated.
"Banks are crying because Silicon Valley eats their breakfast every day and we don't want to join the whimpering party," he said. "Tech companies are our main competitor."
Gref pointed out that 76% of Russian households have an internet connection and, he said, the percentage of families with connections was growing.
Commenting on the breakdown of talks over a possible tie-up between Sberbank and Chinese web company Alibaba Group Holding Ltd., Gref said that "sometimes two elephants find it very difficult to dance a tango even if they are very willing to dance."
Sberbank will continue trying to form partnerships with technology companies, he added.