Day one at SIBOS started bright, hot and early. By the time the first bus departed the hotel it was 32 degrees. If you hadn’t guessed so far, I’m not a fan of intense heat.
So when I stepped off the bus at the Dubai World Trade Centre and saw queues outside…I genuinely thought my life was over. I actually considered running through the fountain at 8:30 in the morning. I decided to stick it out.
Luckily the queues were only so everyone could pass through the airport-like security checkpoint before heading in to register for the week. After assuring them my Sony camera wasn’t a weapon of mass destruction I grabbed my pass and was good to go.
The day was jam packed with sessions, kicking off with ‘The Future of Money’. Straight into the good stuff, just how I hoped it would be.
A Revolution Begins
Today reinforced my view of the world. We are at the start of a digital revolution. Change is already well underway for industries like medicine, manufacturing, travel, publishing and shopping. The next industry that’s going to take the full force of the digital revolution is the global banking system.
In the very first session I heard from Scott Bales (Head of Mobile, MovenBank), Patrick Murch (General Council, Bitcoin Foundation), Gottfried Leibbrandt (CEO, SWIFT) and Dave Gray (Author of The Connected Company).
And there’s one thing that’s crystal clear about global banks. They are all petrified. And those that aren’t are delusional.
Why are they all petrified? Because the very banking system they’ve all pillaged and plundered for decades is experiencing a revolution.
Bank revenues are under threat from the likes of Amazon, Google, Bitcoin and other disruptive companies. The funny thing is it’s a systemic problem. It’s something the whole system faces. It’s been years in the making and exacerbated by the uncertain global economic environment.
The biggest problem banks have is their own arrogance. For so long they operated on the basis they had, and controlled, the trust of their customers. They abused this trust. They made and sold products and services that were good for the bank. That increased revenues and ultimately led to the downfall of many.
And this led to many losing trust in the banks. But you have to put your trust (and money) in something. Fortunately, a number of tech companies and technologies were ready and waiting.
It’s why Bitcoin is more than a fad. It’s why Google and Apple already hold banking licenses. It’s why Amazon is starting to offer loans. It’s all a part of the future of money.
Here’s a comparison of trust. If you went to an ATM and before you had a chance to select how much cash you wanted, the ATM displayed ‘same amount of cash as last time?’
Would that bother you? Or what if the bank came to you out of the blue and offered you a loan for no good reason (that you’re aware of). Would you be impressed with their service, or concerned they were trying to hook you into something you didn’t want?
These kinds of predictive behaviours are very common. Google knows what you want before you actually do. Amazon quite happily suggests things to buy based on your prior purchases. But when a bank uses predictive technology, it feels wrong. We’re reluctant to give the bank our mother’s maiden name and the street we grew up on. We don’t want them to have our location, and money preferences. Because we don’t trust banks. And nor should we.
But what if tomorrow the main headline in the paper read, ‘The Bank of Amazon is Here’? Or perhaps, ‘Google Opens First Bank’?
My guess is many people would switch across in a matter of hours, or probably minutes should the chance arise.
And it’s because there’s a fundamental difference between banks and companies like Amazon and Google. One of these groups’ focuses on services that are best for the customer…the other doesn’t. I’ll leave it up to you to decide which is which.
The Consumer of the Future
Imagine being a ‘Digital Native’ today. By that I mean someone who only knows iPads, Facebook, Google, Amazon. Someone who has only ever known a digital life. They have a psychological framework different to other people. They’re connected, social, and for them opening a bank account should be as easy as signing up for Gmail.
This new generation, the Digital Native, has a willingness to express data with transparency. And they do this only with their trusted sources. And their trusted sources are social media. Instagram, Twitter, Foursquare are just some of those social media platforms.
And this Digital Native is going to be the financial customer of the future. They’ll be the employees of the future. But when technology at home is often better than in the workplace, it’s not going to be a fun experience, so they push back.
If a start-up comes along that engages with the Digital Native in the right way, they become a trusted source too. That’s why young financial companies like PayPal, Xoom and MovenBank are all breaking the traditional shackles that hold back the incumbent institutions of today.
The thought of technology companies coming and invading the banking landscape is genuinely running fear through the global banks.
And they’re afraid for good reason too. It’s widely accepted that the barriers of entry to banking are capital, infrastructure and regulation. All conditions met by tech companies. Apple could buy Visa outright tomorrow. That eliminates capital as a barrier to entry into the banking landscape.
Obviously tech companies have the technologies and infrastructure to compete against the best banks in the world. So that’s not a barrier to entry either. And in terms of regulation, tech companies deal with regulation complexity as much as any major bank. So to think that might be a barrier to entry is foolish.
What I’m saying is if they wanted, these tech companies could step in tomorrow. Banking would be a natural extension of their business. It wouldn’t faze them in the slightest. In fact I’m certain that within the next five years one of the major global tech companies will have a distinct banking arm.
The Threat to the Big Banks
How do I know this? Because according to Scott Bales, ‘Google knows a mortgage buyer seven months before the banks do.’
He’s spot on too. Think about it. When you’re in the market for a property you Google search the area, look for public transport lines, schools, restaurants and dining areas, parks, public facilities, and a whole range of other digital data.
With the complex algorithms and analytics Google has at their disposal, these digital signatures are easily interpreted to flag that you might be looking for a mortgage.
Tech companies already have the trust of the next generation of mortgage buyers and account holders. The Digital Natives share their data with ease and transparency. And should Google or Amazon launch a bank, they have this data on tap.
And when they do, and they will soon, it will completely change the banking landscape. Some banks simply won’t make the cut. You can expect mergers, acquisitions…failures.
The banks that recognise the fundamental shift in how we transact, exchange and manage our money will survive. Those wrapped up in their own hubris will not survive. You only need to Google search ‘Bank of America Twitter fail’ to see an example of a bank that won’t survive.
So be ready. The global economy is in a fragile state. There are start-up companies invading the banking landscape. And customers are as jaded with banks as ever before.
It’s a perfect storm to start a revolution in money.
Sam Volkering+
Technology Analyst, Revolutionary Tech Investor,
Reporting from SIBOS in Dubai
Ed note: You can follow Sam at SIBOS on his Google+ page here…
