Everywhere you look, big tech players are looking to get into the financial services game. But that doesn’t mean Apple, Google, Facebook will replace your bank any time soon. Not by a long way.
Certainly digital has lowered barriers to entry into the financial services space, but it hasn’t killed banking and it won’t for some time to come. According to Gartner research vice president Alistair Newton, saying that Google is the bank of the future is like trying fit a square peg into a round hole.
An issue of trust
The basics of finance still underpin banks, says Newton. “Providing liquidity for markets: those are the basics of banking”. No one does that better than banks.
Doing something well however, doesn’t mean that you’ll keep customers. People can learn, follow and do things better.
The real heart of the issue lies in the fact that while might most people might not like their bank, they do trust it. We might like Facebook, but no matter how much data we hand over to it, it’s seriously unlikely that we’ll trust it with our money.
In fact, a recent US survey from Gartner revealed that the first digital service that people trust after their banks is PayPal. That’s because it built up trust over a number of years though. It had to prove itself over and over again.
The banks are catching up
The tech superpowers do a number of things very well. They’re good at managing data, defining agility, focusing on customer experience and need finding problems to solve, for instance.
But banks are catching up to this now. The fact that smartphone banking apps are winning awards means that they’re starting to understand how important it is to put user experience first.
They’re also innovating in the social space. A number of banks now allow you to log in to your internet banking via Facebook. There are even extreme examples is German bank Fidor, which bases the pricing and interest rates of its products on how many likes it gets on Facebook.
So where do the tech players fit in?
According to Newton tech companies will be best positioned to sell the shovels rather than dig for gold in the financial space.
That’s what services like Wallaby, which replaces all your credit cards with a single card and chooses the best one for a particular purchase, have done so well.
It wouldn’t be able to do that without buy in from the banks. Neither would financial management tools like 22Seven and Mint.
Eventually people will become dominant within these niches but, says Newton, they will remain niches.
Sure they’ll disrupt banking but ultimately it’s unlikely that they will supplant the banks themselves.