Banks consider Google, Apple and Facebook their biggest competitive threat as technology firms offer consumers financial services.
According to research from Infosys and French retail banking association EFMA, 45% of banks rated the threat from technology companies as "high".
Researchers questioned executives at about 100 banks around the world. “After technology companies, the most significant threat is perceived to come from telcos and startups,” said the report.
The research revealed the perceived threat from technology companies had “increased noticeably”, compared with last year.
The report said that, although large IT suppliers pose the biggest perceived threat, it remains to be seen whether this concern is justified. “In spite of the fact that banks fear technology companies the most, we need to wait and see the impact of developments such as Google Wallet and Apple Pay.”
Banking sector disruption
Since the launch of Google Checkout (which recently merged with Google Wallet) in 2006, Google has bought, partnered and invested in financial services firms in areas such as payments, comparison and loyalty cards.
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The Infosys report said banks must decide how they deal with the threat from telecoms firms. “Telcos are continuing to launch services in developed and developing markets, and banks need to decide whether they want to partner with or compete with them.”
Meanwhile, startups face a big challenge in taking on banks in established markets, said the report: “It can take a long time to reach critical mass and profitability.”
Complement or competitor?
Chris Skinner, chairman at the Financial Services Club, told Computer Weekly in July 2014 that companies such as Google will not try to become banks, but can revolutionise retail banking. “The core part of banking is boring for the likes of Google and Facebook – but they are perfectly positioned to provide information enrichment in financial services.”
He said this means banks can focus on what they are supposed to do: “The banks will be there to make sure the services are always available and the likes of Google will tell consumers what they need to know.”
In its Why Google Bank won’t happen report, analyst firm Forrester agreed. It said the high costs and strict regulation of setting up a traditional bank – alongside advertising revenue coming from banks – will push internet firms into roles that support the relationship between banks and their customers. These include transactional payment services, financial advice, money management and product comparisons.
Forrester analyst Oliwia Berdak said traditional banks think new competitors will use their digital might to beat them at their own game.
“But digital disruptors, such as Google, are disruptive because they don’t play by the rules," she said.
"Instead, they use digital technologies to deliver better or entirely new ways of meeting customer needs, often bypassing regulation and re-defining a given industry in the process."