Google and Facebook to influence financial services

Digital media companies could have a part in shaping the financial future, but will not take over from traditional banks, according to a Gartner report.

Gartner has rubbed its crystal ball, which predicts that despite the hype about “digital mega-firms” such as Apple, Facebook and Google wiping out mainstream banks, traditional banks will continue to have the edge over their rivals.

David Furlonger, vice president of Gartner said that the evolution of the internet “continued to raise questions about the continued viability of brick and mortar establishments in retailing and financial services”. 

He said this was because internet companies were seen “as the commercial enterprises of the future”. 

However, he said that retail banking was safe from this competition as far as he was concerned as “it would be like trying to hammer a square peg into a round hole”.

“This just does not fit,” he added.

Gartner said that digital companies had many things in their favour including data management and analytics expertise.  It added such companies were also adept at extending their value chain analysis beyond the core offering, with an eye to identifying new opportunities for business and highlighting specific customer needs.

However, these companies did not have the experience or in-depth knowledge of security, which Gartner said was paramount for all banking applications.

While the likes of Google and Apple were in tune with the security and privacy needs of customer data,  they could not offer their services in this field at the level of the banking industry.

New kids on the banking block may also struggle to ensure that the performance aspect of these systems remained stable with this requirement challenging  technical and economic models of many of the new entrants. Regulatory compliance was also said by the company to prove difficult with these companies having to report to financial regulators.

Mr. Furlonger said that as a result digital mega-firms would alter and shape the market by helping it develop and change by making customers better informed and occasionally making “catalytic forays into the market with niche financial services offerings”.

However, the overall traditional banks would continue to reign in this industry.