Santander’s plan to offer cloud storage to corporate clients shows how banks can fight back against the IT giants encroaching on their market.
Companies such as Google and Apple are moving into financial services with payments services and even offering loans through lending platforms.
The words Google and bank in the same sentence could soon send shivers down the spines of banking executives struggling to keep shareholders happy.
But Santander could take the technology firms on at their own game and take business from them. Santander chairman Ana Botín told the Financial Times that banks are perfectly positioned to offer corporate services such as data storage.
“As I think, 'How I am going to compete with all these new technology players?' I can offer the same services as some of these big guys,” she told the Financial Times, in a recent interview.
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Banks' asset of trust
“As a small business or private individual customer, where you lodge your information is something you should think about,” said Botín. “One of the things that banks have is trust and resilience and, with all the cyber risk, that is incredibly important.”
The fact that people perceive banks as safer places to store data, and that banks are heavily regulated, could make them competitive. Research of more than 6,000 people from Bizrate Insights found that 72% of respondents trust their bank with card details. In comparison, 45.4% trust Amazon, 21.4% Apple and 12.9% Google.
But this might be a misconception. PayPal has 157 million active users, which is more than most banks, while Facebook has more than one billion users and holds a lot of sensitive data. Meanwhile, Amazon boasts more than 244 million users.
IT problems at RBS
That banks are regulated does not mean they keep their IT up to date.
The case with the IT outage at the Royal Bank of Scotland – when systems went down and customers were unable to access their accounts – provides a recent example. In 2012, customers of RBS, NatWest and Ulster bank were locked out of their accounts for days after a glitch in the CA-7 batch process scheduler froze 12 million accounts. Customers were left unable to access funds for a week or more as staff at RBS, NatWest and Ulster Bank manually updated account balances.
Jean Louis Bravard, IT outsourcing consultant and former CIO at JP Morgan bank, agreed this is an opportunity for a bank like Santander, because it has modern technology. It has invested heavily in IT and has used it to its advantage. It uses a banking platform developed in-house, known as Partenon.
“The technology is not hard for a company like Santander and, if it can deliver the service at a low cost, it could be interesting,” said Bravard.
The cloud storage prices the big tech players offer are falling all the time. According to the RBC Capital report, AWS price per GB RAM was $42 in October 2013 and fell to $25 in December 2014. In the same period, Google’s price dropped from $52 per GB RAM to $32.
Banks are trusted but it will be difficult to compete on price, added Bravard.