As tech giants Amazon, Apple and Google continue to conquer new regions of consumer lifestyle – from music and mobile devices, to mapping, software and publishing – surely it’s only a matter of time before they set their sights on the banking sector.
Apple and Google both plan to release low cost financial products within the next five years. As for their potential customer base, according to a recent survey in the US and UK by KAE and Toluna research groups, 10% of the 5000 respondents would consider banking with Apple.
But is this a good idea? While these tech giants certainly have global brand recognition, is it really worth the time, money and effort required to crack this market? And would it benefit consumers to have financial products with a provider who has no experience within the sector?
Cracking the Market
Apple CEO Tim Cook recently revealed that there are 407 Apple retail stores across 14 countries, which serve a million users daily. As the largest online retailer in the world, Amazon attracts around 65 million customers to its US website per month, and has an estimated 10 million members in its Prime program.
As for Google, it has fingers in so many pies it would be impractical to list them. It does however, have a net worth of around US$200 billion. Considering Apple’s net worth is US$185 billion, and Amazon’s net worth is US$90 billion, each of these companies would probably have a few bucks spare to throw at a new project, such as the provision of financial products.
KAE spokesman for the aforementioned Apple banking study, David Rankin, said that given Apple’s success in diversification, there could well be an opportunity to move into the financial services sector.
“There are plenty of opportunities within the categories [Apple] currently competes in,” he said. “We believe that one overriding lesson from this study is of great relevance for the financial services industry: namely the ability to design and maintain a consistently rewarding consumer experience.”
According to APRA, the big four banks in Australia control almost 85% of the country’s $1.16 trillion mortgage market. Although the big four continue to market themselves as people-friendly, there is a certain consumer resentment towards the big banks and their big profits.
If Google and Apple used their money and their brand power to provide a service that cuts underneath that resentment, consumers could be willing to choose them over the big banks.
However, FBAA (Finance Brokers Association of Australia) president, Peter White, said that Australians wouldn’t be swayed – by online home loans, at least. “In Australia, we have seen repeatedly that any form of online completion for home loans doesn’t work – there’s always got to be some form of human intervention,” he said.
White also said it would be financially impractical for an technology company to move into the financial sector.“As an IT company, it would be a very expensive venture to go into,” he said. “I wouldn’t say they couldn’t do it, but I couldn’t understand why they would, especially because they’d be based on American models and American models are very different to what we do here – that’s why we don’t see a lot of them coming here.”
Tarnishing the Brand?
According to a report released last week by brand consultancy Clear, Amazon topped the list of most desirable brands for the second year running. Interviewing 4600 consumers in the UK, US and Australia, the survey gauged the popularity of 245 familiar brands.
While Amazon enjoyed the number one spot again, Apple’s popularity dropped from No. 8 last year, to No. 50 this year. “Starting with an onslaught of too many products in the fall of 2012, the debacle of Maps’ reliability, as well as ‘function over feeling’ branding, has affected its reputation for providing technology that truly matters,” the report said.
Entering into the financial services market – and getting it wrong – could damage these tech giants’ reputations even more. And given the incredibly reduced popularity of bank brands in the survey, Google and Apple could also risk tarnishing their brand with the label ‘bank’.
Whether Australia will see the iLoan on its shores in the near future is yet to be seen. Whether this diversification will be worthwhile for the tech giants or even the consumers is a mystery, however, many may think the arrival of more competition for the big four surely can’t be a bad thing.
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