Tag: banking

And if Google were to Create a Bank?
Traditional Entities would be on the Edge of a Cliff

 

“The future of the banks lies in becoming service providers.”

A few days ago I was giving a talk to some young university students and I asked them the following question: Would you rather put your money in a bank that Google would hypothetically open, or in BBVA or Santander? I was surprised that 100% of them responded Google without hesitation.

I don’t know if banks in general are realizing that the whole concept of “bank” and “banking” as we know it is changing. For the majority of the “millennials” the banks are, at best, largely useless entities that basically serve as a place for them to have their paychecks deposited each month. And that’s for those that work…

Very few of them confirm needing the services that a bank offers, much to the contrary of what happens with Google, which provides them with their daily necessities, communications, and services. These natives to the digital world have a different concept of banks and surely a different model in mind for managing their income.

Therefore, banks should ask themselves how their results would be affected in the case of a hypothetical banking service from Google coming to light and revolutionizing the concept of banking with a service that would allow for paycheck deposits and charges, directly linked to your gmail account. It would be home to your receipts and payments, and allow you to make payments, transfers, and sales through gmail in a quick and easy way throughout the whole world. You’d be able to ask for microloans for online payments and make installment payments for an item that you buy online all from the comfort of your Google account. Only with these services can they triumph with a middle-class clientele.

Furthermore, Google could offer big advantages in the form of low interest rates and zero commissions. The “core business” of Google wouldn’t be centered on the commissions or the interest since they have other sources of income that keep them going, which is exactly what would allow them to offer such attractive conditions compared to a traditional bank. They would have no need for branches when they already have a personal branch with each active Gmail account, and they wouldn’t need marketing campaigns to capture clients with the millions they already have. Lastly, they wouldn’t need users to download a new app because they would simply integrate a new “Money” app into the Android operating system that comes preinstalled on millions of smartphones.

Google would also open up the doors to their being able to add innovative services that a traditional bank wouldn’t dream of launching. For example, they could tack on a platform for home rentals with a flat rate where users could upload their available properties. The tech company would manage the rentals and could even offer joint purchasing options for housing in addition to new mortgage models. Think about new models that would be much more versatile and made in the same vein as the financing options that different automobile companies offer with their “alternative leasing” options.

“What will clients need in 20 years? That is the real challenge.”

Google is much better at understanding how millennials think since they are the ones behind a big portion of the new digital trends. I suppose Google would have to do some research regarding the legal obstacles that exist in terms of offering this type of service. However, with $250B, they could do away with many of the banks of the world and become the new major player in worldwide banking, revolutionizing the concept of “the bank”.

Traditional banks need to rethink their role and think about what they will be and what they want to be in 20 years because I don’t believe that the path lies only in some services going digital and releasing a plethora of Apps. On the contrary, they should think about and design new and innovative services, redesign the purchasing model, the housing model, and study the habits of the younger generation. In short, redesign the model of banking, and of the bank. They should think about becoming a new type of entity that understands the real needs that their future generations of clients, who are perhaps just now starting primary school, are going to have when the time comes.

Personally, I think that the future of the bank is to become a service provider more than a financial entity—a service company with a deep understanding of the relationship between clients, needs, & services.

The 4 Big Businesses of the Internet

 

If we take a step back and review the evolution of the Internet and the exchange of data on a global level, we can see quite clearly which big businesses have stood out from the pack and whose evolution will significantly determine our future: content, big data, banking, and wireless communication.

Content

Content is the foundation of the web, and without it there is nothing. Its evolution has been amazing considering that 25 years ago, computers were black and white and very few could even play a basic video. Content on the web has been the source of global interconnection. Not too long ago, web pages were filled with text, they were ugly, and offered little more than hypertext or links. Nowadays, websites, mobile phones and TV tend to display less and less text in favor of more photos and videos. Content is becoming much richer and more audiovisual thanks to increased bandwidth.

Bearing that in mind, content becomes one of the big businesses of the Internet, and its creation just as much as its distribution will play key roles in how our future progresses. Although, there is of course still much progress to be made: multiplatform, organized, localized content, on demand.  

Having spent 25 years on the Internet specializing in content, I see infinite possibilities for business development. Content, and especially its monetization on the web, is only in its infancy and I still cannot fathom how Google is capable of maintaining YouTube without having any clear use for it. Thinking about those millions of videos occupying hundreds or thousands of terabytes with content that contributes nothing to the company makes my hair stand on end… I can’t understand that their only way of monetizing the platform is with ads that almost nobody sees, thereby making YouTube completely obsolete in my opinion.

Content creation on the Internet is mainly accomplished in two ways: the first, and most used, is by the user who feeds content into the platform (YouTube, Facebook, Instagram…) and the second, is the company that creates its own content, be it through outsourcing or through its own creation (media, newspapers, television…). Neither of these methods of content creation has evolved much in the last 3 or 4 years due to the fact that, despite having more technical capabilities and bandwidth, few advances have been made in terms of monetizing content.

Monetizing is no easy task since users are all too accustomed to “everything free” and that has led to the failure of many paid models, leaving few alternatives to inserting ads into free videos. Personally, I believe that the tendency for users to expect “everything free” will change. At this time, an average user may perhaps utilize 99% free content, but in the future they will tend to demand higher quality and be open to the idea of paying for certain types of content so long as the cost and method of payment also evolve to adapt to the modern digital consumer.

If we analyze this last comment, we come to the drastic conclusion that only a handful of companies will be able to control the content business on a global level. The business strategy here is volume, with flat rate models or low fees for on demand downloading from huge quantities of users. Therefore, I believe that the next concept to be revolutionized is “Home Content”, where there is still plenty of room to grow, to evolve, and still much to offer in the content business. Computers are completely obsolete while mobile phones are peaking in terms of design and usability leaving little more to be offered that would be truly revolutionary. But, the house, our home, is still by and large in its infancy.

The TV watching experience must change radically and content is the basis of the entertainment business at home. Companies like Movistar TV are betting big on controlling this content.

Big Data

Another one of the big businesses that the web has brought us is the information that the user generates while they interact with content. The new age of digital knowledge opens a large door in the world of marketing because the way we understand sales has changed from a global to a personal level. La individual level data that the Internet offers is astounding. This information is a global superbusiness where big Internet companies see a true goldmine.

Understanding the user and how they interact with technology and content is of the utmost importance in order to analyze their consumer profile. There is still plenty of information from users to be soaked up. In my opinion, hypercontent is key to the evolution of big data, the next step in understanding users’ actions and interactions with content.

Banking

Banking still hasn’t really taken off in all the ways that it needs to. Payment systems are undoubtedly a cornerstone to the evolution of the digital world if we want to make the Internet a great business. From my point of view, many banks are completely oblivious to what is about to happen.

I don’t understand why Google hasn’t developed its own personal funds manager or something similar to Internet banking. Or why not a platform of credits to close the circle of Gmail, YouTube and the Play Store? Or an application to set up direct deposit and payments for payslips and bills?

With millions of users, Facebook or Google would have much more credibility with younger users than many of today’s banks. Furthermore, with their huge masses of users they could offer conditions that banks would never be able to keep up with. I see an excellent opportunity to completely redefine what being a bank really means to the digital user. Young people speak a different language than that of traditional banks.

Wireless Communication

The companies that have suffered the most given the changes over the last 20 years are surely those of telecommunications, namely wireless carriers. Slaves to infrastructure and networks, they must adapt their offers to user demand. In fact, we have gone from pricing plans where voice was king and we spoke about cents per minute to flat rate data plans that made SMS messages a thing of the past. The big providers have had to adapt and adjust their offers to the demand generated by successful startups, who determine the consumption habits of these carriers’ clients.

It’s obvious that at this moment, data is the big business of mobile phone companies. But, what would happen if a company decided to offer free data in exchange for inserting ads? Where would that put mobile operators on the totem pole? Access to the web will be cheap and customer loyalty to a given operator won’t come from their current model of offers, but rather from their ability to offer bundled services like news, home automation, and localized content.

In conclusion, the big businesses that have emerged in the new age of digital communication are completely influenced by both innovation and by the demands generated by users themselves. The time is coming when we may rewrite many of the concepts we once thought would last a lifetime.