Friday 29 March 2019 4:25 am

Watch out high street banks – Apple has a credit card and is out to steal your supper

Every day, new competitors are coming out of the woodwork and vying for a piece of the high street banks’ pie. This has forced the big banks – some kicking and screaming – to evolve, and at a pace that they’ve never before experienced.

Change is not a new concept for consumers when it comes to banking. In 2007, cheque usage fell to its lowest level ever. Then came widespread branch closures across the country, driven by the rise in online banking. Nowadays we’re seeing the usage of cash plummet as we become a contactless society.

But when you compare this rate of change to what’s coming, we’ll realise that pace was leisurely.


So, are we ready for the scale of transformation heading our way?

We now sit within a landscape governed by tech innovators fighting to make our experience of managing money as simple and intuitive as possible.

On one side we have the challenger banks like Starling or Monzo, which have been in the market for a few years now. They have made significant headway in unseating customers from the high street banks.

But interestingly, according to the money management app Moneyhub, 74 per cent of challenger bank users still keep their “traditional bank” as their primary account.

So where does banking’s next challenge come from? The Faangs.

The Faangs include Facebook, Amazon, Apple, Netflix, and Google – all companies that, until recently, were disconnected from the banking universe. Now they’re ready and waiting to gobble up the market.

Amazon is currently leading the charge. It already offers credit cards with rewards, short-term loans to sellers, and is even trialling Amazon Cash in US stores.


And when it surveyed its loyal customers, 64 per cent of Amazon Prime users said that they would open a bank account if they got a mere two per cent discount. Consider that there are 90m Amazon Prime subscribers – that’s a potential market of 58m customers right off the bat. To put the scale and weight of Amazon into perspective, it’s market cap is almost three times the size of the top four UK banks combined.

The other Faangs are also making strides. In the last two years, Facebook has announced partnerships with PayPal, Amex and Citibank, enabling users to link their social and banking accounts. Google now offers loans as a recruitment tool in the ever-growing Indian market.

And just this week, Apple announced the launch of the “Apple Card”, an new credit card, built into the Apple Wallet app on the iPhone, designed to help customers lead a healthier financial life. In partnership with Goldman Sachs and Mastercard, the Apple Card will have no fees, lower interest rates, and will offer a cashback rewards programme on every purchase.

While challenger banks have started to alter the rules when it comes to banking, the tech giants are about to change the game completely. The traditional high street banks may have weathered the first stage of disruption from the challengers, but will they really be able to compete with the sheer size and reach of a Faang bank?

Time is running out. Banks need to step back and take a long, hard look at their customer base – and at themselves. Are they really giving customers what they want?

Because if not, the Faangs are coming to steal their supper.

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

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