Say Hello to Facebook Bank

Sunday, 27 April 2014 22:56 Admin CIO2CIO
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According to the Financial Times, Ireland’s central bank is about to approve Facebook as an e-money institution, that will allow it to offer consumers the ability to store money and pay others. Facebook is also said to be considering partnerships with start-ups that offer international money transfer services online and via smartphones. But it is unclear whether people will trust Facebook to handle their money, given lingering concerns about data privacy and personal data mining by the social media network to boost advertising on the site.

At a time when traditional banks are unpopular with many customers and are being hit by more and more regulations, there is an opportunity for internet companies to take on certain service lines that banks provide.
Banks are also struggling with mostly legacy IT that makes it difficult to quickly react to market changes. Additionally several large banks have been hit by major IT failures lately, that have further dampened an already fragile image.
While Internet giants do not have the legacy systems to hold them back and are companies where technology is in the DNA, Andrew Bailey, CEO at financial services regulator the Prudential Regulation Authority, suggested that banks would benefit from ripping up and replacing legacy systems. “What would be a very bold thing to do is stripping the machine down and rebuilding it instead of bolting bits together in complex fashions so you end up with a very complex architecture.”
But it is not just Facebook. Retail banks could face competition from other like PayPal, eBay, Amazon, and Twitter. If those internet savvy companies moved into banking, they would attract many customers. Their systems already contain details about people and businesses and have been handling transactions and money for years.
Recent research from Accenture, of 6,000 consumers surveyed in 11 countries, found that almost a quarter of consumers would consider large internet companies, such as Google and Amazon, as possible insurance providers. It also revealed that consumers see large internet companies as viable alternatives to retail banks in the future.
It is of course interesting to see the traditional banking system being put to the test by new age internet based companies, there is no doubt that many old style central bankers will resist any major shake up to the old establishment but let us not forget that PayPal has been transferring funds among millions of its users for many years, and central banks it seems have not objected.
But of equal importance is how analysts and regulators alike seem to view the modern IT capabilities of internet companies as the most important differentiator against traditional banks in attracting and retaining customers.

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Last Updated on Sunday, 27 April 2014 23:02

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