Can Silicon Valley/Roundabout/any other geographic location where technology companies live, disrupt the world of banking?<br />http://www.flickr.com/photos/ad76/5117310643<br />
I am an Innovation Technician for a bank. This basically means I look at new technologies and trends to see how they could apply to retail banking. I am fascinated by how the technological changes we are seeing today will impact the world of banking and I think 2011 will be a very interesting year.*******************
This is my 7 month old son holding some financial tools that he will never own or use. Cheques will be obsolete by 2018 and you need to be 13 to get a debit card. If in 2024 we are still using rectangular pieces of plastic something has gone horribly wrong.
Now it could be said that our investment banking brothers have been a little bit too innovative over the last few years, leading to the financial meltdown. With customer confidence in banks at an all time low then a big opportunity arises.
Smart tech companies know this. Can the technology and design behind the biggest web companies today, be utilised to change the way people use, interact and manage their money?
Banks operate huge complex networks that span the globe. These networks allow money to move between institutions and process complex things like fraud checks & anti money laundering. At the edges people can interact with the banking network via cash machines and via another huge powerful global network…
…the internet. It is in almost every household and increasingly in everyones hand. The two networks have integrated for things like online banking but I think we will see them become increasingly interwoven over the coming years. The large changes we are seeing on the web brought about by the rise of social and mobile will change what people expect from their banks.
Now I have a theory that people are more willing to share details of their sex lives than their financial lives. But We are starting to see some changes in this behaviour through services that aim to make the sharing of financial information beneficial.
Blippy a social network built around sharing your purchases. It links to your credit card and your purchases are published for all to see. AndSmartypig is a social savings company that allows you to publish your savings goals and progress towards them. People in your social networks can also contribute should they so desire.
We have peer to peer lending via companies like Zopa. Which allows you to lend money to and from other individuals. Instead of lending from an institution. Mint has shown how to visualise your money in a much better way than the banks. They also allow people to set budgets, customised alerts and a whole host of useful functionality lacking from most banks online capabilities.
And now we are seeing someone try to build a web 2.0 bank.BankSimple launches this year in the US. They are on a mission to take the complexity out of banking. built for the web including mobile and they will even have APIs. I am geekily excited this although it will be US only to start with…boo.
So what about mobile? We are slowly starting to see more UK banks bring out iPhone apps like the recently launched first direct app. But mobile apps are not really that innovative. The more interesting thing about mobiles and banking is what the device will become.
This is Square another US startup. Which allows you to take payments via iphone with an extra bit of plastic to read the card. So you can take card payments where ever you are. But adding bits of plastic to your phone to take and make payments will seem twee in the very near future.
This is the Barclays Waterslide advert. The ad is for contactless card technology this allows you to buy things without inserting your card into a slot. So if you don’t have to insert it into a slot why on earth do we need rectangular pieces of plastic anymore? Contactless technology allows payments devices to move inside mobile phones…
This was the very exciting moment (for a bank geek like me) in November last year when Eric Schmidt of Google said this is our new phone and it has NFC. NFC stands for near field communication and is a two way communication technology that brings contactless payments to phones and will change the way we pay for things in the future.
Tap a terminal or another phone to pay. With the mobile as a payment device the two networks become closer than they have ever been before. It will become a two way exchange of data.For example allowing receipts to pass to the phone and the phone to pass extra data such as geolocation. This will be huge.
Now all this innovation and disruption could be seen as an attack on the banks…But I think it represents an equally big opportunity to them. They have the infrastructure that all these tech companies need to interact with money. The banks have the chance to weave themselves into these new systems. Instead of trying to defend against them…they should embrace them.
What we need are APIs andautomated ways to interact with and share data between services and enable banking to become a platform that can be built upon. This could accelerate innovation while still ensuring the banks have a role to play. Because who is going to want to rebuild fraud or anti money laundering processes?
If the banks don’t allow easier access then tech companies might use their own currencies. These are Facebook credits introduced for the purchase of virtual goods. What if this currency made the leap offline and retailers started to accept it? if just 65% of Cityville players used credits that would be more than the users of the great british pound.
So we are seeing lots of innovation but forthese inititatives to go mainstream they have a tough battle. This graph shows the number of visa and mastercard transactions vs PayPal. 5 trillion vs 86 billion. But are PayPal much better placed with the rise of the social and mobile web?
We are seeing a huge amount of change in the world of finance online. We are not quite at the Napster or Kazaa point that the music industry faced mainly because of the value and dependencies on the bank network. So in summary yes I think the tech companies will disrupt,challenge and ensure the banks evolve and I am excited to see just how much they can. Cheers.