Remember a few years ago when the threat from tiny fintech startups had the traditional banking industry abuzz with apprehension?
Now that many banks have either acquired or partnered with fintechs, the real challenge isn’t tiny upstarts after all — it’s huge consumer platforms like Google, Amazon and Apple.
So says Accenture in its latest look at the impact of new digital players on traditional financial services. It came to this conclusion by analyzing data on more than 20,000 players in the banking and payments sectors in Canada, Australia, Europe, China, Brazil, the U.K. and the U.S.
Accenture’s report charts the astounding rise of consumer platforms within the financial space: Apple Pay has 127 million users in 25 countries; as a small business lender, Amazon has loaned $3 billion to SMBs; subsidiaries of Alibaba and Tencent now have a combined user base of 1.3 billion people comprising 94 per cent of China’s mobile payments market.
Accenture lists several advantages these global platforms enjoy over traditional banks — namely, no legacy IT, massive workforce, regulatory framework, brick-and-mortar overhead or century-old business culture struggling to become agile.
“The biggest edge that platforms have,” Accenture adds, “is customer relevance. Because of these rich customer relationships, consumers seem willing to trust platform players to handle all sorts of services — banking is just one of many consumer services that platforms are adding.”
In short, Amazon, Google and Apple have become an integrated part of our daily lives. If we’re already on them to shop, send emails, share photos and listen to music, why not just bank there, too? Platforms are where we spend much of our time, and banks have yet to attain the same sort of ubiquity with consumers.
A post-platform path
Here’s Accenture’s take on how banks can respond to competitive pressure from digital mega platforms:
Partner up: In the spirit of “if you can’t beat ’em, join ’em,” Accenture suggests banks partner with platforms. It cites JP Morgan Chase, whose Amazon Prime rewards credit card gives the bank access to Amazon’s global base of 100 million customers.
Repurpose bank data: Accenture advises banks to extract new value from their existing data. For example, BMO customers can import their banking data directly to Freshbooks accounting software and apps, boosting BMO’s profile among SMBs. Spanish bank BBVA goes even further, providing merchants with insights into consumer behavioural trends based on anonymized data on its credit card customers.
Use bank tools: Unlike consumer platforms, banks are largely viewed as secure, stable, longstanding institutions. Accenture says banks can capitalize on that trust by generating new revenue from their own technology assets. In the U.K., clients of Barclays can store sensitive documents on the bank’s secure cloud and retrieve them through the Barclays mobile banking app.
Here in Canada, TD is looking at blockchain beyond bitcoin cryptocurrency. In a recent interview, TD’s Chris Owen told me the bank is exploring blockchain to securely authenticate, transfer and track the ownership of assets — physical ones like paintings or digital ones like stocks and bonds — for TD customers.
“Blockchain creates a common version of the data that all parties involved can see. It’s transparent and you can track it,” said Owen, VP of TD’s blockchain group.
Move beyond banking
If mega platforms have eaten into the territory (and revenues) of banks, why can’t banks take a bite out of theirs? Accenture says banks can, and should, return the favour: “Like the platform players that are moving into banking, banks can offer a range of banking and non-banking services for both consumers and businesses.”
Canada’s biggest bank has already moved in that direction. RBC helps homebuyers research neighbourhoods, movers, painters and garbage schedules. It helps new businesses register with the government and provides them with business cards, letterhead and cloud-based accounting software.
After interviewing RBC CEO Dave McKay this past summer, the Financial Times summarized his vision for RBC’s future as “a broader platform offering diverse services, from registering a startup company to helping people rent their house on Airbnb.”
Will a bank someday deliver your groceries, find you a hotel or reserve you a table at a restaurant? Too early to say. But playing outside the traditional sandbox of loans, mortgages and credit cards promises a bigger payoff for banks than simply letting Apple and Google eat their lunch.