Could banking with Facebook and Google become the future

When it comes to social media and online shopping, people expect personalisation and convenience. And when it comes to their banking, many people want personalisation and convenience, even if that doesn’t always seem possible.

That could be just one of the many reasons millennials in particular say they would be prepared to use firms like Amazon, Google, Apple and Facebook for their banking services. They are used to the one-click convenience and want it replicated across other services they use.

The company MuleSoft surveyed more than 8,000 people across the world and discovered that 52 per cent of 18 to 34-year-olds say they would consider banking with Facebook or another tech giant they use regularly. And third of all age groups agreed.

They said they wanted simplicity and convenience, plus a more personalised service. Despite recent data concerns, it appears we want our banking to be as modern as our Instagram account.

Could it happen?

Shashi Nirale, senior vice-president at customer experience management firm Servion, says he can clearly see a route into banking for the tech giants.

“The likes of Apple, Google and Samsung already have mature payment and peer-to-peer solutions on offer,” he says, “so it’s not a stretch at all to imagine them offering current accounts or loans and mortgages in the future.

“A company like Amazon, for example, already has the customer base and importantly, all the data it needs on those customers to offer personalised banking products with ease.”

Of course, tech giants won’t be able to offer high street banking services but then, for a lot of people, neither do high street banks. A recent survey from Which? found that UK bank branch closures are reaching an “alarming” rate of 60 a month.

At the same time, digital-only challenger banks such as Monzo and Starling Bank are growing in popularity, powered by their mobile and tech-first attitude.

On top of that, the recent Open Banking regulations mean that customers can ask their banks to share financial data with regulated third party companies.

It’s designed to ensure customers own their data and can share it with firms who will use it to help them manage their finances.

And that means almost a barrier-free entry into banking for the tech giants if they decided to so flex their muscles.

Privacy fears

Of course, given a slew of recent data concerns, some might argue that customers will not be willing to trust big tech firms with their private banking transactions.

The truth is that convenience trumps privacy fears.

“The question for millennials is: why wouldn’t they?” suggests Nirale. “This demographic already operates much of its life within the ecosystem of a company like Google or Apple, so if it’s convenient and intuitive, using those companies for banking would be no different at all.

“Ultimately, convenience will win out over concerns about security, just take a look at how much data younger consumers are willing to give up to major players so they can access the latest services and offers.

“The fact is, banking services and apps from major tech firms are likely to be far better integrated with the lifestyle of a millennial using an Apple or Android device than anything a Lloyds or Barclays could offer, and customers would be drawn to the fluid experience over and above concerns about security.”

Ethically speaking

One thing that might hamper the bigger tech firms, or at least give fintech startups the edge, is a growing focus on ethics from younger banking customers.

A recent report into the future of money carried out in the US and China by the Innovation Group at J Walter Thompson Intelligence, shows that 76 per cent of Chinese and 65 per cent of US consumers say ethical behaviour is important when choosing a financial institution. It found growing demand for banks to have a social good or an ethical stance baked into their business models.

Concerns over Facebook’s use of data, for example, might put millennials off banking with them because of ethical concerns rather than privacy worries.

Of course, as yet, this is all speculation. But many bankers expect that further disruption of some sort is coming; payments technology firm Auka published a survey of European bankers earlier this year and found that a third believe that new data laws will drive a “fundamental” banking shift over the next five years. More than a quarter said they expect Facebook, Google and Amazon to take the role of banks during that time.

Lucie Greene, worldwide director of the Innovation Group, said: “The financial sector is going through a period of unprecedented change, presenting massive opportunities and also challenges to traditional institutions.

“Consumers are adopting new behaviours en masse, including peer-to-peer payments, digital-first banks, cryptocurrencies and more. They expect more not only from bank brands’ services and ethics, but also from their curb appeal and branding.

For some, the implications of Big Tech moving into banking go far beyond worries they might personalise your advertising or that their ethics might not be up to scratch.

Earlier this year, Francisco González, executive chairman of Spanish bank BBVA warned that companies like Facebook and Amazon could “replace many banks” and demanded that global action is taken to ensure they are subject to sufficient regulation so that they do not pose a threat to international financial stability.

Companies like Amazon and Apple have the opportunity, they have the technology and they have the ability to invest. Whatever that might mean for global financial stability and regulation, they could certainly rock the business stability of traditional banks.