For those who are asking where the banking industry is headed, how a GAFA Bank will look like, what banks can do to bridge the existing digital gap, and even leverage the disruption - here is a short summary.

1. 2017 ‫יוני‬
By: Meirav Harel and Orly Stern Izhaki
June 2017
The Story of the Banking Industry

2. The world is in the process of change, in almost all industries, including in the financial
sector.
Some call this process "The Fourth Industrial Revolution" - The Digital Revolution.
Even the way things are done has been changing: The way we shop, the way we order taxis,
the way we watch TV, or try on clothes.
One thing seems clear - we have not yet seen it all, and the changes that await us will be
vast and interesting.

3. What was the trigger for this
revolution?

4. 1. The Customers - The generation called "The
Millennials" which were born between 1980-2000,
had grown up with technology, and therefore have
unique expectations and needs.

5. 2. The Technology - In itself, technology does not necessarily create
change, but it can, on the other hand, become a tool that allows
addressing advancing customer needs.
Technology is moving ahead in a mind boggling pace. It enables
things that have been considered science fiction till not long ago.

6. And how are companies dealing with this?
Well, that depends. Some of them are confused, some think that this is a
passing trend, others don't understand what they need to do, and therefore
are not doing much, and some are chasing any possible technology in the
effort to become "innovative".
But "innovation" in itself is not enough. It needs to be based on a deep
understanding of the customers' real needs. Only after the customers' needs
are identified, innovation and technology can be used effectively.

7. Zooming into the Banking Industry:
Banks do not differ from other companies that had
found themselves in the midst of this digital revolution.
They too are trying to figure out how to deal with the
changes.

8. But, this industry has some unique characteristics:
• The industry is not well liked by its customers, and younger
generations don't understand why banks are even needed.
• The technological legacy systems the banks have been built upon,
are very old and complex, therefore implementing any changes, is
problematic Time to Market wise.
• Banks do not have the needed resources, the corporate culture, nor
the knowledge to compete with technological companies.
• Competition is easily entering the banking sphere in a dizzying pace.
• The banks woke up a bit too late, and they need to move a very big
ship

9. The threat to the well-known
Banking Industry:

10. • During the last decade financial startups have been popping up
continuously. In Israel itself, there are over 400 financial startups (There
are around 12,000 FinTech startups worldwide).
• At first the banks thought that these startups pose a threat, and that an
unbundling process is occurring to the well-known banking system.
• Today the understanding is that these startups can actually help the banks
in their race towards an improved customer experience, can help bridge
the existing gaps and create innovation faster.

11. But, even though the banks and FinTech startups are mostly
cooperating, some of the financial startups are trying to become
banks.
For instance, the successful lending company SoFi, had requested a
banking license.
https://techcrunch.com/2017/06/12/sofi-applies-to-be-a-bank/

12. But, the real threat is actually coming from the side of the technological giants - a.k.a
GAFA.
Whether any of them decides to open a full bank, or if they only offer partial financial
services, they have a few significant advantages:
· They are well liked, and immersed in almost any aspect of our life.
· They're Global, and have a vast amount of customers.
· They are technically strong, and have wide resources.
· They hold a lot of interesting data about their customers, and know how to create revenue
from this data.
· They create many cooperations with other companies.
· And most importantly - are not bound by the same regulatory restrictions, that the
financial players are.

13. Suddenly, Bill Gates saying about
banking seems clear…

14. So how would a bank run by
the Tech Giants look like?
Here are some examples

15. Payments
https://www.igeeksblog.com/how-to-send-
receive-apple-pay-cash-via-imessage-ios-11/
Apple enables paying in stores, without the need to use a credit card (The card is initially
connected to the customers apple account).
Starting with iOS11, which will be launched Sep 2017, transferring money between apple
users will also be available.
The service is so simple and intuitive that it's available straight from apples messaging app,
on the iPad, the smart watch and on mac computers.
The money is transferred to apples digital debit card,
and can be used anywhere that apples payment
service is available, or can be simply transferred
to a bank account.
BTW, if you were wondering how much this service
costs, well, if you're connected to the debit card –
the service is free. With a credit card the service
will cost 3% in commissions.

16. /https://www.medianama.com/2017/06/223-android-pay-worldremit
Google launched a digital wallet a while ago. Googles wallet enables paying in stores and
at businesses without the need to use a card.
In addition, google allows transferring money between users with Android Pay.
Lately, google announced that it is cooperating with WorldRemit, which will allow
international money transfers using googles payment service.
Payments

17. https://techcrunch.com/2017/04/03/
amazon-launches-amazon-cash-a-way-
to-shop-its-site-without-a-bank-card/
Payments
Amazon had launched "Amazon Cash" service which allows customers to deposit money at
over 10,000 brick and mortar stores that amazon created cooperation's with.
The customers receive a printed or SMS Barcode, can present it at one of the participating
stores, and can deposit cash (15-500$) into their amazon account.
This service is free of charge and is done in real time.
PayPal has a similar service called PayPal My Cash Card

18. https://techcrunch.com/
2017/04/11/facebook-messenger-
now-supports-group-payments/
http://www.businessinsider.com/
facebook-whatsapp-plans-
payment-service-for-
india-2017-4
Payments
Facebook uses the fact that it has a wide social network, and through its messaging service
messenger, allows transferring money to people, and lately to businesses. Facebook has also
launched a service that enables group transfers, between a few people.
WhatsApp, facebook’s other messaging service will be enabling money transfers between
users in India, which lately has become a very interesting market.
This service was backed by the Government.

19. https://www.techinasia.com/
wechat-pay-vs-alipay
Payments
The Chinese messaging service WeChat has been giving banking services for quite a while
now.
WeChat is the Chinese version of WhatsApp that enables customers to transfer money and
buy in stores with barcodes (instead of using credit cards).

20. https://techcrunch.com/
2017/05/09/alipay-first-
data-us-point-of-sale-
expansion/
Payments
AliPay is the payment service offered by the Cinese retail giant AliBaba, which offers
payment alternatives in stores and online.
This service has over 450 million users worldwide.
The company has mostly been offering its services in China, but has lately announced its
entrance into the American market.

21. http://www.cnbc.com/2017/06/16/
amazon-plans-to-crush-small-business-
lending.html
Lending
Quite under the radar, Amazon has been giving loans to SMEs in a total amount of over
$3billion during the last 6 years, starting around 2011.
The size of loans offered are between 1000$-750,000$. In the last year alone the company
had given out over $1 Billion in loans to over 20,000 SMEs in USA, England and China. This
raises the question about whether or not amazon has actually already become a bank.

22. http://fortune.com/2015/09/14/
/webank-china-social-network-loans
Lending
After a customer's initial deposit into WeChats digital wallet,
the customer can receive loans from WeChat.
Loans are capped at 30,000$, and can be received digitally in a few seconds.

23. Connecting the Banking world to Voice and AI
https://www.engadget.com/.../
18/google-assistant-send-cash/
https://techcrunch.com/
2016/03/11/amazon-alexa-can-
/now-pay-your-capital-one-bill
Google home will soon allow money transfers through Google’s
virtual Assistant, as easily as saying "Ok Google, Send John $10 for pizza".
Another example is CapitalOne Bank that offers banking services through
Amazon Echo, which is based on Amazon Alexa. Through this voice interface,
customers can receive information about their bank account, transfer money
and more.

24. So - What do banks have that
the others still don’t?

25. Data!!!
Very important data about each customer,
including his history, his financial habits, his
preferences, and more

26. So, How can Banks survive, or
even win in this complex situation?

27. 1# Define a clear and focused Strategy
Many Banks tend to shoot in all directions, due to the
stress and the understanding that time is running out.
This causes banks to be perceived as unprofessional in
the eyes of the customers, creates a mess, lack of
focus, and eventually creates poor quality products.

28. 2# Focus on short term plans as well, in order
to bridge the gap that had been created in
comparison to the competitors.

29. 3# Create a competitive edge based on the Data
Customers don’t like to mess with their finances. That means that
banks can create a "Proactive Bank", that can actually help its
customers think, identify opportunities, and help build a better
financial future for its customers. This can be done by creating
smart notifications, using AI for instance, that would be beneficial
to customers when needed.

30. 4# Know your customers
The knowledge about customer preferences is not all in the hands of
the bank employees, and bank employees don’t necessarily represent the
general public. Instead of dealing with surveys, it is very important that
the "Digital workers” in the bank literally talk to the customers, look
into the customers' eyes when the customer brings up important issues
about his banking experience, and says what he really wants. This
should not be a one-time event, but rather an ongoing way of work.

31. 5# Create connections, and don’t develop everything in—
house
It's important to have a befitting infrastructure, which upon the bank
can "fintegrate" startup solutions. There are so many alternatives, it's
inefficient to reinvent the wheel.

32. Orly Stern Izhaki
orlys.izhaki@gmail.com
Meirav Harel
Meiravharel25@gmail.com
To summarize,
Banks are dealing with a strong competition, but alongside the challenge,
there are interesting opportunities. The solution lies in identifying the
customers needs, understanding the competition, and in defining a lean
and high quality strategy that can be the basis of offering real solutions
to the customers needs.
Want to hear more?
Feel free to Contact us.