GAFA and Banking – He Who Dares Wins
Laurence Coldicott, Senior Content Director at FinTech Connect.
Back in the days of MSN and Internet Explorer, I remember buying my first iPod. It was a gift from my Dad to help me with a 27 hour flight to Sydney. The pod’s battery lasted 6 hours of the trip (something Apple still hasn’t really got the hang of), but the user experience was like nothing I had ever experienced before. It changed the way I listened to music, and made me an Apple convert; something which persists to this day.
Since then, over the past 15 years the GAFA group (Google, Apple, Facebook, Amazon) of companies have dominated the consumer domain, creating digital engagement across multiple verticals and touchpoints.
Central to this has been a customer first philosophy, delivering relentless value. As they enter the world of banking and fintech; let’s take a look at the potential impact they could have
For Google, everything is, and always will be about data. By entering the exciting world of FS they get new sources of data. If data is the new oil, Google are the Saudi Aramco; the big hegemonic power, who has a huge amount of soft power. Google will use paytech and fintech to personalise your message even more, and create greater advertising revenues to be the one stop shop to find everything!
Apple continues to be a hardware company. A unique beautiful behemoth, but a hardware company all the same. It wants its customers to loyally continue buying Apple products. What is central to that consumer loyalty is a commitment to the best User Experience in the business. In banking it’s doing this by rolling out Apple Pay in every geo-location regulation allows, and fighting back at any legacy banks trying to stop them. Apple has created what is arguably the most seamless UX in retail finance.
Facebook has an advertising driven revenue model. The more time users spend on Facebook, the more targeted advertising they get and the more money Facebook earns. When converted to how this would work in the fintech space there are two key incentives; firstly access to a user’s financial information would further emphasise the effectiveness of that personalised messaging. Secondly, providing a successful payment platform would help create new revenue streams beyond their traditional ad models. Watch this space in 2019 to see what they do!
Amazon is not new to this game. The company has sold cards for many years; and also via its flagship AWS product are providing a lot of core cloud infrastructure for major banks. Amazon is also dipping its feet into launching a current account in partnership with JP Morgan. This along with the opportunities of Open Banking could create huge new revenue sources, while cutting out the middle man!
So what's next?
If the GAFA companies get it right, this could be a game changer for the consumer, and the retail banking industry as a whole. However, the way an individual manages their finances is a very personal thing, so the big question is: will consumers will have enough trust in big tech to take a leap of faith away from the incumbents?