IBS Journal July 2017
11
High street banks being stalked by technology giants
Senior Editor Bill Boyle
companies on its tail. T
What have been dubbed the GAFA (Google, Apple, Facebook and Amazon) companies could pose a greater threat to traditional retail banks than existing ‘challenger’ banks and fintech claims new research. In a study of retail bank IT leaders and consumers, undertaken by Peru Consulting, the majority (57%) of IT leaders believe it is likely that GAFA companies will enter the UK retail banking sector within the next five years.
And when GAFA companies offer retail banking services, more than a third (36%) of consumers said they would consider switching to them, rising to half (50%) among 25 – 34 year olds.
When asked why they might consider the change, 41% of consumers said GAFAs would probably offer better technology, with 40% citing the potential of more innovative products and services.
According to the research, the risk posed by GAFA innovation appears to be seriously underestimated by banking IT leaders and their boards of director. Less than 5% of respondents identified the temptation of new technology, such as mobile apps, as the biggest reason for customers to switch banks.
Younger consumers were more likely to answer that ‘it makes sense to integrate my banking relationship as I’m an existing customer’ (31% of 18 – 24 year olds versus an overall average 20%), suggesting that they are already anticipating the benefits of shopping and banking with a single brand in the future.
he banking industry should wary of the tech
Ian Robinson, Principal Consultant at Peru Consulting, talking to IBS Journal, said: “We are not saying that there is going to be a wholesale culling of the banks – these changes are gradual – however I can’t help reminding people that Sky was looked on by BT in the early days with complacency and look where it is now. We have all read the stories about Amazon considering a purchase of Capital One so let’s realise that this process is already taking place.
“The banks are trusted for some things – but startups such as Revolut are bringing a new, easier, mobile experience to tasks that the banks and Post Office still make hard – you cannot transfer money between their currency cards. The startups are making the experience much better and the older banks will have to catch up. Ironically it was the CTOs of the banks we surveyed who thought that it was the products and services – and not the technology – which would make a difference when in fact technology and its application in making tasks easier is the key to consumer adoption.”
GAFA companies have already harnessed the power of big data analytics and algorithmic programming to provide targeted offers to individual customers and retail banks will need to be aware of the power that this brings.
“There is an enormous opportunity for traditional banks to evolve their customer experience and learn from innovation introduced by a diverse range of new market entrants. But technology teams are already under enormous pressure to respond to growing cyber threats and maintain extensive legacy systems and networks.”
www.ibsintelligence.com
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