Revolutionary Measures

Does Apple Pay spell the end for banks?

There aren’t many people that actively like their bank. In the wake of the credit crunch and subsequent bail-out, bankers became the focus of people’s anger, being accused of recklessness at best, and outright fraud at worst.English: ATM Bank Albilad, Riyadh Saudi Arabia...

At the same time the rise of technology has eroded the central position retail banks have in people’s lives. The majority of us do most of our banking online, with the main physical interaction happening through the screen of an ATM. We don’t know who our bank manager is – and they probably don’t have any leeway to get us a better deal on our mortgage.

So, it is unsurprising that new entrants have been looking at the sector. PayPal has grown to be the de facto way of paying for goods on eBay, and has now spread to lots of other sites. Its smartphone app now makes it easy for people to pay for goods on the high street as well. Bitcoin goes further, not just marginalising banks but the entire idea of a national currency.

However the real threat to banks is from brands coming into the market and pushing them into the background. The launch of Apple Pay in the US this week is a prime example of what might happen. By using your iPhone 6 (or Apple Watch) and Near Field Communications (NFC) you can simply pay by waving your device close to the payment reader. The built-in fingerprint sensor in the iPhone provides security (unlike traditional contactless cards), and the money is automatically debited from your bank account.

Of course, the money paying for the things you buy still comes from your traditional bank account. But in an era of low interest rates, essentially it turns the bank into a safety deposit box which stores your money, with the front-end, customer facing activity controlled and branded by Apple. That is partially down to the stringent regulations you need to meet to become a bank, and also down to where the highest margins are within the transaction.

So what can banks do to out-innovate the likes of Apple? And can they change a culture still built on retail, branch-based banking to reflect a modern, mobile-first lifestyle? Barclays has launched a service called Pingit which lets you send money to friends or family and pay bills, even if you are not a customer of the bank. Since launch in 2012 the Pingit app has been downloaded 2.5 million times and £350m has been sent through the service. But this is small change in the overall scheme of things.

Apple’s biggest competition may well come from Zapp, a service run by payments processor VocaLink that uses your existing mobile phone banking app and account for payments. Scheduled for launch in 2015 it has two big advantages over Apple and Pingit – it runs on all smartphones (unlike Apple Pay) and is seen as independent from an individual bank, although it is not yet supported by all of them.

The battle to control payments and the front end to banking promises to be fascinating. Will Apple’s brand triumph, despite (or even because of) its exclusivity or will Zapp’s wider approach succeed? How can both companies market themselves to overcome security fears and gain traction with a wider market beyond early adopters. Add to this that Google is rumoured to be buying PayPal to give it a foothold in the market, as well as other innovations yet to launch, and 2015 promises to be a busy year in the battle to replace your wallet.

 

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October 15, 2014 Posted by | Creative, Marketing, Startup | , , , , , , , , , , , | 2 Comments

What’s the right size for a tech company?

The news that HP is splitting itself in two (ironically a few years after a previous CEO lost his job for proposing the same idea) made me think about the size and structure of tech companies. Some companies invest in growing rapidly and aim to be biggest in their field, others focus on niches, while a third group aim to be a jack of multiple trades, spanning diverse sectors.

HP was previously in the jack of all trades camp, with its fingers in lots of different pies, from enterprise software and services, through servers and networking equipment, to consumer PCs and printers. It will now become two companies, one focused on the enterprise and the other on PCs and printers. Sadly, it haEnglish: This sign welcomes visitors to the he...s missed the chance to name one H and the other P, going instead for the more prosaic Hewlett Packard Enterprise and HP Inc.

While the two companies will be smaller, they will still each have over $50bn in revenues, and are likely to be hard to disentangle. At the same time eBay has announced it will divest its PayPal subsidiary, following pressure from shareholders and the entrance of Apple into the payments market. I must admit to being cynical about efforts by many tech titans to refocus themselves – it can look suspiciously like a random throw of the dice that keeps investors happy but has no real long term strategy behind it. After all, the world’s most valuable tech company, Apple provides software, hardware (mobile and desktop) and music and video content, alongside payments, maps and health data. And no-one has yet pressured it to split.

However there are definitely optimum size and types of company, depending on the maturity of the market they are in. Emerging sectors, such as the Internet of Things, change fast, so a company needs to be flexible and focused, with the ability to pivot quickly and respond to market conditions. It stands to reason that smaller players will be able to do this faster than legacy behemoths.

Mature markets run less on innovation, with much tighter margins. You are selling a replacement piece of software/hardware and any new features are likely to be incremental not transformative. Consequently the bigger you are the greater the economies of scale when dealing with suppliers and customers. The car industry is a perfect example outside the tech industry, where you need to be big to have a chance of profitability.

The tech industry is going through a rapid wave of change, driven by the move to the cloud and the rise of mobile devices. Previous shifts (such as from the mainframe to the minicomputer and then the server) have led to market leaders falling by the wayside – does anyone remember the likes of Data General for example? In fact HP has done well to survive so long, with a heritage that dates back to 1939. What will be interesting to see is if can make it to its 80th birthday in 2019, or whether it will be carved into even smaller chunks before then………..

 

October 8, 2014 Posted by | Cambridge, Marketing, Startup | , , , , , , , , , | Leave a comment

The future of money

The internet has radically changed how we bank, removing the need to physically visit and turning a thousand and one redundant branches into All Bar Ones and Wetherspoons. But the actual mechanics of transferring money around haven’t really changed. Through a combination of regulation and the sheer complexity of the financial world most of us still entrust our money to a bank and use their systems to move it around. There are some notable new entrants, such as PayPal, and smaller banks, like Metro Bank, have been launched, but the majority of transactions still go through the same channels as before. The only change being that we do the work ourselves online rather than queuing up for hours in a draughty branch behind the man from the arcade paying in his weekly takings one penny at a time.

Twenty pound notes

But most people recognise that the banking system doesn’t deliver the flexibility or mobility that technology can underpin. So how do you do banking without the banks? One way would be to make it simple to transfer money from person to person using a web-based platform that the majority of the world is a member of. Step forward Facebook, which has applied to the regulator in Ireland to launch e-money across Europe. This would allow people to transfer money to others on the social network as well as to buy things online. The combination of Facebook’s reach and brand could provide stiff competition to the likes of Western Union. However those worried about privacy may baulk at giving Facebook access to their bank details in any way, shape or form.

A second way is to change the currency altogether and allow payments and transfers through new forms of money, such as Bitcoin. However, the danger of an unregulated market has come back to haunt Bitcoin, with exchanges mysteriously emptied of money and government concern that the currency is used to pay for drugs, arms and sundry Bad Things.

Now the banking industry itself has come up with a third way. Paym, has been created by umbrella body the Payments Council and enables money to be transferred by simply typing in the phone number of the recipient, provided they are also registered on the service. Fast, direct and no need to give out your bank details to other people through insecure channels such as email. However it looks like the banks themselves are unconvinced by the possibility of doing themselves out of a job. 20 million account holders of RBS (and its subsidiaries NatWest, Ulster Bank, Clydesdale and Yorkshire banks), as well as First Direct, won’t be able to use the scheme until later in the year, while Nationwide’s five million customers will have to wait until 2015. RBS says it is prioritising getting its IT systems straight, after several high profile meltdowns, before joining.

With more and more of our money transferred online to friends and relatives who are further and further away from us, we need options that make it easy to transfer money simply, and quickly. But given our previous bad experiences with banks, will it be Facebook that steals a march and becomes the new financial hub for the internet age? Either way, consumers should benefit through genuine choice and hopefully better service, whoever they pick.

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April 30, 2014 Posted by | Marketing, Uncategorized | , , , , , , , , , | 1 Comment

Spam goes social

No-spam

Most of us are painfully aware of the amount of email spam out there. According to Kaspersky Lab, 70% of emails sent in Q2 2013 were spam – a rise of 4% over Q1. But as software gets better at detecting spam, particularly malicious emails, criminals are moving into the social world.

A separate survey by Nexgate found that social spam rocketed by 355% in the first half of the year, meaning that one in 200 social media posts is spam. 5% of social media apps are also spam, according to the research.

In many ways this is a logical development – better spam detection technology and heightened awareness mean that email is less effective at getting through to the gullible. With social media it is easier to reach a mass audience with a single tweet or post, and if you can unwittingly persuade people to share it, peer recommendation helps spread it even further and faster.

Essentially people need to apply the same levels of suspicion to social media as they do to other channels such as email – if it sounds too good to be true it probably is. And they also need to be careful what they say online. Cyber criminals are becoming increasingly sophisticated, harvesting information from social media (such as your children’s names or favourite football team) and using those to crack banking passwords. While this takes a lot longer than whacking out an email telling you your PayPal account has been limited, the rewards are potentially much greater, and there are plenty of people with the time and technology to build up enough of a profile to access your details.

So what should people be doing about it – and how can marketers make sure that their valuable and targeted communications reach the right audience and their brands don’t get hijacked? A lot of it is common sense. Don’t connect to people that you don’t know without checking them out and be careful what you share (and with whom). It is the 21st century equivalent of not leaving your wallet unattended or giving your address to strangers. Make sure you understand your privacy settings and bear in mind the default is normally set to open.

For marketers, there’s a double problem. Firstly, they need to increase engagement with target audiences so that their emails make it through spam filters in the first place (and even more importantly aren’t then deleted unread) and that they use the data available around the web to deliver insight into what customers want, without being accused of cyberstalking. And secondly, they need to protect their own brand against being hacked, particularly on social media. Who has the login details of your Twitter, Facebook and LinkedIn pages and are they regularly changed? What is your social media policy – and how do you ensure that all your staff protect their passwords when it comes to business networks such as LinkedIn? All it takes is one person at a multinational company to be hacked and their account used to send spam and your reputation is in serious trouble.

So, the moral of the story is, be vigilant and remember that your online presence is now responsible for the majority of your personal or corporate brand reputation. Protect it on social media like your wallet in real life or you’ll suffer the consequences.

 

 

 

 

October 2, 2013 Posted by | Marketing, Social Media | , , , , , , , , | 1 Comment