Keeping up with the news on things digital is bloody hard work. If you don’t try, FOMO rears its head and if you do try, it is hard to feel like you have a clear picture and feeling overwhelmed is commonplace.
With that said, this week, a few thoughts on banking, banks and digital.
APIs are very much the subject du jour. PSD 2, the European directive on matters payments is a major catalyst. PSD 2 is essentially a forced opening up of every EU bank’s infrastructure. Simply put, the banks must now provide a means for third parties to access a common client’s information. This is not totally new; for more detail see my earlier post. And, they are doing just this, with activity not limited to Europe; see, for example, “Wells Fargo inks data sharing agreement with Intuit“.
The forced change of PSD 2 will allow for a service to act as an aggregator; one service can interact with several bank accounts and provide an overall view.
There are more nuanced changes too; Apple is moving into P2P payments. Their latest iOS release allows Apple’s clients to pay and receive money using Apple Wallet. More on this in a thoughtful post from Aki Ranin.
Apple’s offering seems to be the same type of service as the TWINT offering in Switzerland. This one is a favourite of mine; it allows me to send money to my teenage son on demand. It supposedly works the other way round too, but I have never seen that feature in action.
This bank owned platform has something that Apple doesn’t and may never have, the ability to send money that can be instantly withdrawn at a cash machine. Eventually, we may well have a cashless society; that day is though a long way off.
Ignoring, that subtle nuance, my logical reasoning would say that the platform provider is likely to become more important than any of the providers of the bank accounts.
The tricky supplementary question would then be: who will consumers trust to provide the platform.? The jury of public opinion seems to be hung on this one. If you Google “consumer trust in banks vs. Apple”, the results are mixed. In Europe it seems, consumers are less willing to trust non-banks than their American counterparts. See: “Consumers trust their bank most to provide a mobile wallet.”
So, if your are a bank in Europe, market and regulatory forces will drive you to offer an API that allows access to information inside your bank. A wise bank would though be alert to the fact, that if all they do on the digital front is provide an API to let others win, then they will be losers in the long term.
Lessons to be Learned:
A wise bank has to think beyond the regulatory imperative. It needs to be thinking what it needs to do to be an aggregator. That is like doing the splits; on the one hand adding an API that lets others come in and at the same time, pursuing a platform strategy that positions them to do well out of having API access to other institutions.
The folks at HSBC have demonstrated some understanding of this; see Finextra, ”HSBC opens ‘social network’ for business customers”. Imagine you are buying a house; HSBC might well be a very good partner for the mortgage. But, and it is a big one, there is a lot more to buying a house than just the mortgage. What I would really want as a client is a project manager, who will advise me about things like moving companies, changing insurance, organising utilities. I am sure you could add to the list.
Banks have a couple of advantages: they have a degree of trust and they can deal with cash. Banks need to work out how to leverage those advantages. As they do it, they need to keep an an eye on their wing mirrors. Not their rear view mirrors, their wing mirrors. “Objects are closer than they appear”.
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