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Why banks should worry about Google, Apple, Facebook …

I've talked for a while about:

and so on and so forth.

So when I read Venessa Miemis's article on the Bank of Facebook today, part of her Future of Facebook Project, it inspired me to think of things a little differently and look at:

  • who are safekeepers of data today;
  • what are their attributes; and
  • what does it mean for banks?

The answer surprised me, as it explains why we should be worried about the likes of Google, Amazon, Apple, Facebook, Zynga and more entering the financial data space, because it's all about information warfare.

What is information warfare all about?

It is put best by this comment and quote from the Economist last year:

"'What we are seeing is the ability to have economies form around the data, and that to me is the big change at a societal and even macroeconomic level', says Craig Mundie, head of research and strategy at Microsoft. Data are becoming the new raw material of business: an economic input almost on a par with capital and labour."

It's all about viewing data as though it were capital or labour. A raw material for business.

Banks have long held the view that they are data managers.

For example, I regularly quote Walter Wriston, who was CEO and Chairman of Citibank from 1967 to 1984. Walter was famous for a visionary statement he made that: "Information about money has become almost as important as money itself."

He was/is so right.

If you're interested, there's an interesting Wired Magazine interview with Wriston in Wired Magazine in 1996 where lots of other visionary quotes ring out:

  • "Technology has overwhelmed public policy. People keep predicting this will lead to a crisis, but I don't think it will."
  • "Money that can move. It's the opposite of patient money. But money really has no volition of its own. It all depends on the people who own it and use it."
  • "The increased velocity of money gives you a difference in kind – not just degree. It's like a piece of lead: you put it on your desk, it's a paperweight; put it in a gun, it's a bullet. Same piece of lead. Big difference."
  • "This is the first time in the history of the world that every major country has a flat currency that is not based on gold or silver or some commodity. Today, the value of money is hooked to nothing other than the information that flows through it."
  • "Today, intellectual capital is at least as important as money capital and probably more so."
  • "We originally said that land was wealth. Then we thought it was industrial production. Now we realize it's intellectual capital. The market is showing us that intellectual capital is far more important than money. This is a major change in the way the world works."

Amazing interview, amazing vision, amazing person*.

Admittedly, this was during the height of the information revolution discussions of the 1990s, when Microsoft was rocking the world and mainframe moved to desktop.

But he formed this view – that the basis for wealth has evolved from land to labour to information – back in the 1970s, when technology first hit the banking system and moved us to an information economy.

Today, this vision is realised and businesses exist as information economies.

And they fight based upon information.

A good example is Google.

There are plenty of search engines around – Ask Jeeves, Lycos, Altavista, Bing, etc – but Google won this game early on by making algorithmic analysis of data more relevant and organised.

And they continue to do this today by making searches contextual and geographically localised.

And Google is not a monopoly. They have competition – Wolfram Alpha, an answer engine – and can only maintain their leadership by being just that: a leader in semantic answers.

Facebook is the same.

Facebook has had plenty of other players before them – Friendster, Friends Reunited, Bebo, MySpace, etc – and we forget very quickly these other players when one wins out.

However, Facebook is not a monopoly. They have competition – Diaspora – and only maintain their leadership through continual innovation and enhancement of their information management capabilities.

Apple is another example.

Apple were almost out of business when John Sculley ran the business.

Steve Jobs returned and it is through his leadership and vision of continuallyand elegantly innovating that they bounced back – oh yes, and recognising that the MP3 player would be the core of a lifestyle revolution.

The iPod has really been the making of Apple.

It gave them back their heart and meant that the legion of Mac users, who loved its simplicity and ease, could now be used as a music machine.

Then the vision of Apple was to introduce iTunes, and iTunes is the real engine as that's their information advantage.

The iPod can easily be substituted, as can the iPhone, but iTunes is a unique hold over information.

And that's where real information warfare begins.

Information warfare is all about continual evolution and leverage of data advantage over the potential and unrealised competition.

Which leads me to Amazon.

Amazon was all about books, we thought.

Sure, that's where it started, but it soon moved from books to music, films and more.

The company then got really smart and started to make data mining its core art form.

Data leverage by looking at dataprints – like fingerprints, the unique way in which each of us search, buy and consume – and then relating our dataprints to each other to find relationships.

By doing this, Amazon built its business on finding offers that you might buy, because people like you buy it and they know this thanks to our unique dataprints.

Soon, Amazon was more of a behemoth of data, moving into selling anything from white goods to televisions.

And it is easy to sell online, when you know how to leverage data relationships which is why even this was not enough.

Recognising its information leadership, Amazon opened Amazon Web Services (AWS) to become the largest cloud computing firm out there.

Amazon now adds server systems to AWS every day that would have been the equivalent of the complete server architecture required to run the total retail business two years ago.

That's information warfare – leveraging systems expertise to get more share of wallet, expansion of market, growth of proposition, and development of the offer into a range of services with no dependency on one.

If Amazon was still just an online bookshop, it would be dead.

Amazon is, instead, an information guerrilla and gorilla.

They win in the information as capital stakes.

Which brings me back to banking and the issue we face.

The reason we worry about Amazon, Google, Facebook, Apple and others is because they all know how to use information as capital.

They are all now pointing their information leadership at money.

  • Amazon attracts over 700 million visitors to its .com domain annually, and has around 65 million customers just on its US website each month
  • Apple has over 200 million active accountholders details on iTunes
  • Facebook's 600 million users like gaming – Zynga's Cityville reached 100 million users in just six weeks – and all gaming will find that it is mandatory to use Facebook credits from 1st July 

I could go on, but here's the point: these guys know how to use information as ammunition.

Can you name a bank that does?


From Geek Culture



* note that later in the interview he also says: "Who wants to do their banking at eight o'clock at night after a tough day in the office? The jury is out on that." Comments made about home banking which, in 1996, was not really available.


About Chris M Skinner

Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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