Banking Review

Cloudy with a chance of competition

OPINION

The plans for Sony Bank in Australia, Rogers Bank in Canada and Movenbank in the US  are all proof banking competition of the future is going to come from non-traditional players.

The first big driver for this is the mobile channel, which is leading to a rethink of the way people can bank. With prepaid payments gaining ground and telcos looking for a piece of the action, this is a milestone in the ongoing disintermediation of banks.

The second trend playing a key role in enabling new competitors is the consumerisation of IT, which sees a levelling of the playing field for organisations seeking to deliver a strong customer experience without having to spend big on the kind of IT large banks are still spending millions on every year just to maintain their operations.

And finally, leading on from the consumerisation of IT, is cloud computing, which is enabling start-ups like Square and Bank Simple to take on financial services industry giants at a fraction of the cost it would have taken less than a decade ago.

Meanwhile, the death of project MAMBO, with millions of dollars in investment down the drain, leaves our banks back at square one for payments innovation. The Reserve Bank must now consider whether underinvestment in system innovation requires additional regulation, and the issue of faster payments is likely to weigh heavily.

Meanwhile, Microsoft has become the first technology firm to weigh into the debate, calling for the payments infrastructure to be modified to facilitate virtual currencies, such as Microsoft Points.

With Bitcoin  still grabbing headlines around the world, virtual currencies are shaping up to be the thorn in the side of regulators, as more and more online communities find ways to exchange items of value that don’t fit with the traditional understanding of monetary value.

Banking just got interesting.