Could Facebook purchase a bank?
Fundamental upheavals cannot be ruled out in the world of finance
According to a recent survey, an increasing number of younger people, so-called digital natives, can imagine themselves doing their banking and insurance business directly with Amazon, Google or Facebook. When will these dormant competitors of classical banks become aware of such a potential, and what would this mean for the traditional financial sector?
What would happen if such competitors shook up the market?
Many institutions offer services dealing with money: classical banks, online financial facilities, FinTechs. Brick and mortar or digital, with more or less customer-friendly opening times or permanently available on the Internet. This should really cover all demands.
Should. But maybe it doesn’t. Dynamic markets repeatedly show that there is room for competitors. If they offer attractive products, a clever marketing strategy and better customer service, market shares can rapidly shift. This is currently being demonstrated by Tesla Motors and Uber: Tesla is constructing ground-breaking, electric motor vehicles and although the company has not yet been able to make a single dime of profit and the production of the first volume model, according to expert opinions, might possibly even jeopardize the company, Tesla is still influencing the product strategy of many other car manufacturers.
The same applies to Uber: notorious for its unscrupulous approach, the company ignores existing rules and legislation, shamelessly poaching worldwide in the market of inner city passenger transportation. If it can keep up this strategy long enough, existing structures will be destroyed and the market will fall to the aggressor. Uber uses the potential of digitisation for its business model and, as such, is superior to existing passenger transportation companies.
Once a customer – always a customer
Despite the wide range of services offered, fundamental changes in the financial world may also be looming around the corner. Silicon Valley is home to giants with global potential. A 2017 investigation by Accenture Consulting, which surveyed nearly 33,000 banking and insurance customers in 18 nations worldwide, reveals the extent of untapped opportunities for a penetration into the financial world. Almost a third of the surveyed customers are open to the idea of doing their financial transactions with Amazon, Google or Facebook. Thirty-one per cent of banking and twenty-nine per cent of the insurance business would accordingly migrate to the Internet giants. In Brazil, it would even be fifty per cent, in Italy forty-two per cent. But in Germany, the respondents seem more reluctant.
The driving force is the willingness of consumers to increasingly rely more heavily on computer programs for advice in money matters. Comparison portals may have paved the way for this development by spitting out the best insurance option or the best bank interest available after some basic data has been entered. If well-visited and popular corporations such as Facebook, Google and Amazon offered these services, the confidence in them would obviously soar, because these giants virtually invented the Internet business.
Data as the deciding factor
At a time when search engine operators are constructing self-driven cars and computer manufacturers are running world-wide musical exchange platforms and who are soon likely to be offering television, the extension of the business model to financial services is by no means absurd. Especially since the starting point couldn’t be better: all successful digital conglomerates have enormous data stocks, which enable them to speedily offer highly personalized services. And anyone who is not afraid to reveal himself and his data to Facebook, Google and Co, would warmly welcome the expansion of their services.
Irrespective of whether this is effected by hostile takeover or newly established companies: shaking the financial market up via the Internet cannot be prevented. The current players should, therefore, act all the more wisely and, regarding their customer services, position themselves in a modern and creative manner. Those who feel well-served by their bank or insurance company, will not thoughtlessly switch to other providers, just because they are a tad cheaper. And Facebook or Google’s ability to interconnect all personal data is also not likely to appeal to every consumer.
The outlook is clear: sooner or later, competition will penetrate the financial world, and it might be a completely different player who does not stem from Silicon Valley. It is therefore vital to act in a forward-looking manner – any bank which unnecessarily delays the necessity of digitisation will inevitably lose the basis for its business.
picture: Fotolia, Jr Casas, 155078986