"Money Makes The World Go Around"
Most banks right now are in disarray. If financials and economics weren’t already confusing customers enough, an added element of which financial institutions to trust with their hard earned pennies is becoming increasingly difficult to judge accurately. We all know by now how we got into this ‘meltdown situation’ but what happens next? Where is the next paradigm shift in the banking industry?
I think the first step is for someone to create a brand customers can start to trust. Which means everything about the operation needs to be made transparent and visible to the customer – alright, your average Joe public may not be able to understand the more finer details, but with transparency, comes trust and ergo with trust, comes customers. Let Google search answer and educate on the finer points of banking for those who wish to understand the details in full blown Technicolor.
How do banks become transparent then? Easy, they go online! Of course, this has been tried before – remember HSBC’s FirstDirect was an internet bank, as was Egg and a few of the other brands which are now owned by the bigger, more traditional banks. This is because the traditional banks were slow in responding to the early waves of internet banking and were sceptical of what their customers really wanted. Who knew that customers would want to check their balance in the middle of the night? By buying these ‘online banks’, they effectively closed down the competition and built their services around them.
The problem, however, is that there are now no independent online banking institutions and with banking currently being an industry in turmoil, who would want to step up and start a new online bank right now? How would they attract customers and how would they actually run? See, any new bank start-up would have to be able to generate money and make investments and be attractive in terms of generating interest and making loans available, etc – all which is pretty tricky right now and could go wrong at any time, meaning attracting customers is also difficult and the potential of stability or collapse is no less risky than the existing institutions.
I believe there are, however, a few who could make this happen. Way back when one of the earliest web 1.0 success stories was PayPal, a ‘trusted’ company created as ‘man-in-the-middle’ to handle payments made across the internet between third parties. It’s most recognised use is on the auction site eBay for payment of goods. Look again at the services offered by PayPal today and they can now provide payment protection on your purchases! They make their money by taking a small percentage of each transaction, as any good middle-man does. However, PayPal still depends on its users linking their traditional bank accounts to the PayPal account, meaning they don’t have the added worry of looking after their customers’ bank/savings accounts; and they don’t have to worry about the added services such as loans and mortgages that traditional banks provide almost as standard now.
Google have a similar “PayPal” like service called “Google Checkout”, which operates in exactly the same way, they take small percentages of transactions between the customer and the seller. We all know that Google is a billion dollar company. Just for one moment imagine what could be achieved if Google were to start offering banking services; digitising its customer’s finances right across the board: bank accounts, savings accounts, mortgages, loans, everything.
In addition to Google continuing to operate like a traditional bank and making investments and walking that fine balancing act of picking the right companies to invest in and selling at the right times, they could also capitalise on their position as Google and do the second best thing they do and sell advertising that is directly aimed at individuals. Your latest transaction from your G-Bank account says you purchased the latest PlayStation, well, why not advertise the latest games directly to that person, providing a very convenient “Google Checkout” link directly below it, generating not only advertising revenue, but also capturing that percentage on the next online sale; money which can then be ploughed back into further investments or paying interest on customers accounts.
Google don’t have to do it all themselves though: take loans for example, there are already web start-ups out there that can match those with money to those who wish to loan money, using their clever systems they can negotiate on interest payments, duration and penalties, etc and the two parties can opt in or out of these ‘online loans’. Google could guarantee the loan repayments or act as middle-man between the two parties (taking a small cut in the interest on the repayments themselves perhaps in exchange for guaranteeing the transaction).
Perhaps it’s not all as simple as this and selling our financial data and transactional activities over to Google isn’t the way forward for some people, after all, a lot of people are already wary about just how much Google knows about us, from hosting our documents, email, searches, etc. It’s also believable that Google wouldn’t want the hassle of controlling a large number of financial accounts and having the burden of providing these banking services. So then who do we rely on to provide these; Microsoft? No, they’re not that type of company. Yahoo? They already have too much to worry about. Facebook? Unlikely, they are too young and already have their own financial worries (reportedly spending $1million a month on electricity alone). Tesco? Possibly, they are already operating savings accounts and car insurance services, plus they have the financial might to set up and operate such a scheme, but it is a risky strategy for them to diversify into an unstable industry.
I think the first step is for someone to create a brand customers can start to trust. Which means everything about the operation needs to be made transparent and visible to the customer – alright, your average Joe public may not be able to understand the more finer details, but with transparency, comes trust and ergo with trust, comes customers. Let Google search answer and educate on the finer points of banking for those who wish to understand the details in full blown Technicolor.
How do banks become transparent then? Easy, they go online! Of course, this has been tried before – remember HSBC’s FirstDirect was an internet bank, as was Egg and a few of the other brands which are now owned by the bigger, more traditional banks. This is because the traditional banks were slow in responding to the early waves of internet banking and were sceptical of what their customers really wanted. Who knew that customers would want to check their balance in the middle of the night? By buying these ‘online banks’, they effectively closed down the competition and built their services around them.
The problem, however, is that there are now no independent online banking institutions and with banking currently being an industry in turmoil, who would want to step up and start a new online bank right now? How would they attract customers and how would they actually run? See, any new bank start-up would have to be able to generate money and make investments and be attractive in terms of generating interest and making loans available, etc – all which is pretty tricky right now and could go wrong at any time, meaning attracting customers is also difficult and the potential of stability or collapse is no less risky than the existing institutions.
I believe there are, however, a few who could make this happen. Way back when one of the earliest web 1.0 success stories was PayPal, a ‘trusted’ company created as ‘man-in-the-middle’ to handle payments made across the internet between third parties. It’s most recognised use is on the auction site eBay for payment of goods. Look again at the services offered by PayPal today and they can now provide payment protection on your purchases! They make their money by taking a small percentage of each transaction, as any good middle-man does. However, PayPal still depends on its users linking their traditional bank accounts to the PayPal account, meaning they don’t have the added worry of looking after their customers’ bank/savings accounts; and they don’t have to worry about the added services such as loans and mortgages that traditional banks provide almost as standard now.
Google have a similar “PayPal” like service called “Google Checkout”, which operates in exactly the same way, they take small percentages of transactions between the customer and the seller. We all know that Google is a billion dollar company. Just for one moment imagine what could be achieved if Google were to start offering banking services; digitising its customer’s finances right across the board: bank accounts, savings accounts, mortgages, loans, everything.
In addition to Google continuing to operate like a traditional bank and making investments and walking that fine balancing act of picking the right companies to invest in and selling at the right times, they could also capitalise on their position as Google and do the second best thing they do and sell advertising that is directly aimed at individuals. Your latest transaction from your G-Bank account says you purchased the latest PlayStation, well, why not advertise the latest games directly to that person, providing a very convenient “Google Checkout” link directly below it, generating not only advertising revenue, but also capturing that percentage on the next online sale; money which can then be ploughed back into further investments or paying interest on customers accounts.
Google don’t have to do it all themselves though: take loans for example, there are already web start-ups out there that can match those with money to those who wish to loan money, using their clever systems they can negotiate on interest payments, duration and penalties, etc and the two parties can opt in or out of these ‘online loans’. Google could guarantee the loan repayments or act as middle-man between the two parties (taking a small cut in the interest on the repayments themselves perhaps in exchange for guaranteeing the transaction).
Perhaps it’s not all as simple as this and selling our financial data and transactional activities over to Google isn’t the way forward for some people, after all, a lot of people are already wary about just how much Google knows about us, from hosting our documents, email, searches, etc. It’s also believable that Google wouldn’t want the hassle of controlling a large number of financial accounts and having the burden of providing these banking services. So then who do we rely on to provide these; Microsoft? No, they’re not that type of company. Yahoo? They already have too much to worry about. Facebook? Unlikely, they are too young and already have their own financial worries (reportedly spending $1million a month on electricity alone). Tesco? Possibly, they are already operating savings accounts and car insurance services, plus they have the financial might to set up and operate such a scheme, but it is a risky strategy for them to diversify into an unstable industry.
What about one of the existing banks? There are some of them that are still able to pull off such a paradigm shift in the industry, but with so much attention focused on them right now, spending any of their money on branching out onto the web will come under large scrutiny and is therefore unlikely to happen.
Who can possibly make this happen then? Only one answer; a tech savvy web entrepreneur with a large amount of financial backing. Now, where to find one of those?.......
Who can possibly make this happen then? Only one answer; a tech savvy web entrepreneur with a large amount of financial backing. Now, where to find one of those?.......
0 comments:
Post a Comment