Comments on: What would be the iPod of Financial Services?

By: fannie Carnes

fannie Carnes — Fri, 22 Apr 2011 17:37:41 +0000

This post is awesome..i've been reading tons of crap posts from other blogs, but shows you have a more educated reader base.
Business Loan

By: sdjohns

sdjohns — Tue, 28 Oct 2008 20:01:03 +0000

Indeed, that's how GE Capital got going in the '80s, and I guess GMAC. But it's interesting to see where such manufacturer initiatives have ended up – the expansion beyond financing the sale of own products into direct retail credit, mortgage and insurance appears not to be sustainable. The finance piece becomes too unwieldy – at scale, success risks the group being valued as financial institution, and a credit risk or insurance disaster could put the whole group at risk. Nice ride while it lasts, though.

By: sdjohns

sdjohns — Tue, 28 Oct 2008 13:01:03 +0000

By: Guillaume

Guillaume — Mon, 27 Oct 2008 21:11:18 +0000

About your prediction of banks becoming back-office processors, I agree although I know some have been making this prediction for the last 10 years. This is a long process in the making. Perhaps this crisis will be the tipping point. It is clear to me though that the über-banks resulting from the government-initiated mega-mergers will struggle to provide high-touch customer service.
I agree with you that retailers who have excellent relationships with their customers have a unique opportunity here. I think a retailer that would cover a wide range of products/services could effectively decide to invest in its customers, fronting the bank and issuing a much more credible investment story of "we want you to buy from us, today and tomorrow". Re: Tesco, something of interest to me (given my interest in complementary currencies) is Tesco Vouchers (http://www.tesco.com/clubcard/clubcard/)
I would also think that cash-rich manufacturers of goods/services have an excellent opportunity as well. A company like Apple or Microsoft might find it opportune to more than ever trade credit for their products against applications developed for its platforms or music/movies made on its computers/software. I don't think this practice was unusual of successful firms during the Great Depression.

By: sdjohns

sdjohns — Mon, 27 Oct 2008 13:58:37 +0000

Yes, it turns out banks do give us a false sense of security. If you panned back from those laughing retirees on their yacht, it would probably show a reef looming dead ahead. So they won't get away with positioning themselves as, say, sonar equipment to help you navigate the reef ahead. And any claims of 'transparency' won't cut it either.

As a prediction for 2008 (following the demise of Northern Wreck in '07) I blogged that banks will only be the back office, not the front office of financial services 2.0. Too many other retailers command customer loyalty now, and the banks' last value claim - safety - has vapourised. Instead, consumer finance and other payment services will become fully integrated step in whatever retail or P2P activity you're engaged in. There'll be no need for all the murderous fees that banks charge or other profiteering, because the finance/payments piece will be only one small part of the retailers' overall volume equation and tied up in the value proposition to consumers. That's not to say that I was being particularly prescient, I was merely highlighting an emerging trend. But it's interesting to see it play out, with Tesco's purchase of its JV with Royal Bank of Scotland, as a significant example. Extending the retailer's brand to investment and other products, like share trading, will follow. The retailers will have a vested interest in keeping the bank service providers "honest", to protect their much broader, higher value customer relationship.

By: Guillaume

Guillaume — Fri, 24 Oct 2008 15:33:12 +0000

Simon, thank you for your humorous examples. It indeed raises some interesting questions. I think helping people reduce the vast amount of options to 1-3 options per major decision (buying/selling a car, buying/selling a home, etc.) based on their preferences and circumstances would be pretty valuable, if possible.
I was also thinking that if such an all-knowing service can't promise such peace of mind, why do financial services marketing messages is so focused on that today showing us retirees on their yacht and families having fun in their new house. I think financial services (banks, insurance) already give us a false sense of security.
Perhaps then, the future would be for a service to actually be more/fully transparent with regards to risks involved. Certainly, P2P lending is one such service where the direct connection between people removes this abstraction, which is usually the source of our false sense of security (“someone must be taking care of it”)

By: sdjohns

sdjohns — Fri, 24 Oct 2008 08:17:10 +0000

Interesting – I guess it's like being a “trustafarian”, with a trustee basically in charge of your affairs. Enough people supplying “all” their data might also improve the predictive quality of consumer credit reference data. But the devil is in this concept of “complete peace of mind”. What does it mean in practice? Do you really want it? If set up appropriately or prudently, the service might merely bring you a dull sense of certainty, or even doom. It could make you “feel” you're in a straightjacket from the start. Will it tolerate discussion or override, or will it present you with decisions or restraint. “Yes, sir or madam, I know that on a three year outlook you can afford a Maserati, but on our five year view of your affairs we're thinking more the Prius”. “Sorry, old boy, Asian stocks are about to tank, we're auctioning the Bentley at 3pm”. And how sympathetically will this trusted entity really be able to treat you when your circumstances change over time, e.g. unemployment, divorce, illness, death in the family and so on? I'm all for a more personalised financial experience, but the all-knowing trusted entity could present us with a pretty joyless life experience, even if financially it achieves a “better” result.