Twenty years ago, I worked on a strategy for the future of banking. My conclusion was that banks would merge with telecommunications firms and become hybrid institutions. Twenty years later, it hasn’t happened. But will it?
It was interesting because way back then I worked for NCR which was owned by AT&T. AT&T, a telecommunications business, was all about the network. NCR, the cash machine business, was all about banking. The two didn’t get on very well as banks were all about basis points differential, but telcos are all about minutes on the network.
Interestingly, even as the alignment of both industries started to converge, that mentality has stayed the same. Banks are all about risk management; telcos are all about volume of calls and data.
However, the meme of banks and telcos coming together doesn’t go away. Many of my banking colleagues go to the big GSMA jamboree in Spain every year; and many telcos appear on my banking panels at many tradeshows. Many of my bank friends have had stints in their careers working for telcos; and many telco guys turn up in banks to manage their mobile banking play.
This is why I find it interesting that banks today talk about themselves as technology companies that happen to have a banking licence. First, they’re not technology companies, they’re banks; second, if they were something else, they would be a telco and not a technology company.
This is because the backbone of the banking today is the network. And the thing that both industries have in common, that technology firms do not, is frequent customer contact. A telco is with us 24*7 and, for many, that is what they want their bank to be too. A telco knows intimately where you are all day long and, in many ways, could probably work out what you’re doing. Combine that intimacy with a complete analysis of your financial lifestyle and appetite for risk, and you’ve got a good method of leveraging proactive, predictive, personalised, proximate service.
That’s something I’ve blogged about before and is core to the future banking offer. Deep data analytics to provide incredibly personalised service that acts as a financial blanket around our lives, and makes us spend and save smarter.
Another thing I’ve blogged about before is the innovators dilemma, which is specifically that the mobile money operators are coming in with a basic offer: payments transactions; and then upscaling. The last time I blogged about that, I asked the question: can banks downscale? Can banks become mobile money operators?
The answer is yes, and some are. There are several banks that offer mobile services or even own their own Mobile Network Operator (MNO). There are some MNO’s that have opened banks, such as Orange in France.*
The symbiosis of high customer contact, location-based services, deep data analytics and financial lifestyle support make for a compelling offer, so I’ll go back to my prediction of twenty years ago and say it again: banks will merge with telecommunications firms over time, to provide a hybrid service. I call this service digilife, a term that I’ve intriguingly only seen used in one other financial operators’ presentations. That company happens to be called Ant Financial. Just saying …
* It is notable that Orange Bank has been a resounding success: more than 30,000 people signed up in the first week; 100,000 in the first four months; and Orange Bank targets two million customers by 2025 or 2,5 % of the French consumer banking market.