High Street banks ‘under threat from tech giants’
Written by Anthony Strzalek
High Street banks face a growing threat from technology giants, with 57 per cent of retail bank IT directors believing that GAFA (Google, Apple, Facebook and Amazon) companies will enter the UK retail banking sector within five years, a new study has revealed.
The research, conducted by Peru Consulting, found that the GAFA firms could pose a significantly greater threat to traditional retail banks than existing ‘challenger’ banks and FinTech startups.
If and when GAFA companies offer retail banking services, more than a third (36 per cent) of consumers claimed that they would consider switching to them, rising to half (50 per cent) among 25 – 34 year olds.
When asked why they might consider the change, 41 per cent of consumers said GAFAs would probably offer better technology, with 40 per cent citing the potential of more innovative products and services.
According to the research, the risk posed by GAFA innovation appears to be seriously underestimated by banking IT leaders. Less than five percent of respondents identified the temptation of new technology, such as mobile apps, as the biggest reason for customers to switch banks.
Ian Robinson, principal consultant at Peru Consulting, said: “Consumers increasingly expect to receive a highly personalised service from their retail banks in line with their positive experiences with online retailers. GAFA companies have already harnessed the power of Big Data analytics and algorithmic programming to provide targeted offers to individual customers and retail banks will need to be aware of the power that this brings.
“There is an enormous opportunity for traditional banks to evolve their customer experience and learn from innovation introduced by a diverse range of new market entrants. But technology teams are already under enormous pressure to respond to growing cyber threats and maintain extensive legacy systems and networks.”