Facebook is reported to be close to securing a license from the Irish Central Bank to offer e-money services.
The social network giant clearly sees lots of opportunity in the money business and wants some of the action.
Technology firms have long been eyeing the financial services industry for means of delivering services that could disrupt a sector long viewed as inefficient and disconnected from its users.
In a 2013 Deutche Bank report, it outlined a series of competitive challenges coming from Google and PayPal. Broadly, the bank identified a significant threat to its innovation capacity as a result of onerous and expensive regulatory (compliance) obligations. Deutche Bank is concerned that its banking model could be challenged in some key sectors by technology firms that deploy ‘walled garden’ strategies where services from banks and credit card companies become less relevant.
Banking and financial service firms face another significant challenge; trust!
According to the 2014 Edelman Trust Barometer report, trust in financial services and banks remains low whereas it is high for technology firms.
The race for banking business is about to heat up. In the coming years, Google, PayPal and Facebook (and start-ups yet to be born) will demolish segments of the traditional fees-based banking model.
With enormous data insights, the social media and technology giants can predict with increasing accuracy the needs of consumers and when to position offers and services that meet those needs.
Deutche Bank is right to be concerned. With a lot at stake, banking and financial services must build trust AND technological relevance if they are to survive!