There’s currently a lot of hype around ‘disruption’ in the banking space – whether it be fresh-faced fintech startups and payments providers, or more established technology companies or financial institutions looking to develop the next ‘big thing’ within their own ranks. But what if we’re overlooking some of the world’s most powerful consumer brands in this banking race?
A few weeks back I was attending a client event in London that explored the future of banking. During the main roundtable session panelist Chris Gledhill – a well known Fintech influencer and industry commentator – raised a very interesting question: “why does it have to be a bank that runs your account? We’re assuming that there’s only value in money. What about data, or even coffee?”
Chris made an interesting point, because it made me question the fundamental basis of what is “valuable”. A £10 note only has this value because we’re told its value, based on what the markets, the Bank of England and other factors are dictating at that point in time. But this piece of paper is really just a physical representation of a value, and value means different things to different people. Bitcoin is a great example of a monetary value with no physical cash, and as I’m writing this its value has now reached an all-time high – £2,651 per coin.
Consumer brands have tried to break into this space already – the likes of Tesco, Sainsbury’s and Virgin have all opened up financial services of sorts, whether that be a bank, credit card or personal loan service. However neither one has seen the same success internationally, as was highlighted by Tesco’s infamous failed attempt to branch out to the U.S. in 2007. The worldwide customer base simply wasn’t there. Once more, the offerings were nothing new or innovative – they simply had a slightly more competitive interest rate, or offered a handful of loyalty card points with every credit card purchase.
But with the introduction of mobile payments services such as Apple Pay, and global smartphone use still on the rise exponentially (2.87 billion people are expected to own one by 2020), there’s an exciting opportunity for powerful international brands, with their huge customer reach, to change the game.
Through Starbucks’ hugely popular prepaid app, coffee tokens, gifts and rewards can be shared person-to-person, bypassing any bank. Money isn’t the value here, Starbucks’ products are, and that’s what its customers want to deal in. Users can store rewards in their Starbucks account, earning interest and loyalty points on them. So you can already begin to see the parallels to banking, just with a different value. Once more, the coffee giant now has more money on its customers’ cards and pre-paid apps than many banks have in cash deposit (over $1.2 billion), so the foundations are there for them to create a powerful online bank regardless.
In addition, these large international brands have huge, widespread customer bases already in place – something a Tesco or Sainsbury’s don’t have. Even when looking at more established bank, Barclays’ outfit claims to offer 22 million current accounts, but compare that to the customer base of McDonald’s – the fast food chain serves 68 million people every day. Not even a huge bank such as Barclays can compete with this. McDonald’s has an unmatched, dedicated following that trusts the brand. With these numbers, it’s entirely feasible that the fast food chain could also run a hugely popular and profitable bank from the off.
Then there’s the idea of personal data currency too. In an increasingly digital world, where more and more data is being created each day by everyone online, there’s huge value in what it shows – a consumer’s preferences and habits. Any company can now tailor products and services to your needs, since they’ll know exactly what you like, when you’re likely to buy, all the way down to the colour you’ll want it in. As the Economist pointed out, data is the new oil, and whoever can best-manage this ‘commodity’ will be the most successful.
So while a ‘McBank’ certainly won’t appear overnight, it seems the groundwork is in place for one of these international consumer brands to create a very successful banking service – it just may be a ‘McCoin’ or data you’ll be paying with, rather than a £10 note.
Ben Rose, Senior Account Manager, Technology
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June 20, 2018