Competition in the banking world is good for consumers

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CompetitionBanks make billions of dollars in profits. Some of the most successful and powerful high tech companies such as Google and Apple want a piece of that action.

The competition to be your banker of choice is about to heat up and that will be beneficial for us all. The only way a consumer will change their purchasing habits is if they get something better. So by all means bring on the competition.

The high tech sector’s motivation to invade the banking business is money. Canadian banks made a profit of $33 billion last year and to state the obvious we are a very small country.

Global banking profits are gigantic. These tech savvy giants will offer competition for banking services such as paying for purchases and transferring funds.

Apple revolutionized the way music is distributed. Netflix gave consumers a better way than traditional cable companies, of watching television and movies. The chief executive officer of J. P. Morgan Chase which is America’s largest bank said that large tech firms “all want to eat our lunch.”

Consumers want banking to be secure, simple and cheap. All of that has to be delivered to an increasingly mobile population.

The challenge for the banks is to offer that experience. Many will argue that it will be easier for high tech firms to learn about banking than for the banks to learn and adopt current technology to improve the banking services.

With profit in the billions on the line you can anticipate traditional banks will invest significant dollars to meet the challenge of new competition and the changing needs of a mobile tech savvy consumer.

Late last year the Royal Bank teamed up with MasterCard to develop a wrist band that identifies the person by their cardiac rhythms. That would be far more secure than a PIN and password.

A company owned by the Bank of Nova Scotia has introduced a finger print scanner as a method of confirming someone’s identification. They also have the ability to display the user’s bank account balance through a new app on their Samsung wrist watch.

The fight to be the banker of choice is already intense and that will only magnify. Much has already changed. Remember the days when banking was done at a bank?

Technology then came along and allowed the banks to switch many of their services from costlier banking staff to a less expensive and more efficient means in the form of technology.

Cash was replaced by credit cards and debit cards; a great business model for the banks. Those were the good old days. Now a customer at the checkout counter does not just rely on the traditional banking options.

Google Wallet allows the customer to swipe their phone without the need for a plastic bank card. PayPal has an app that also allows the phone to be used. Again there is no need for a bank. The final large competitor is Apple. They are promoting Apple Pay on their new iPhone 6 that was released last year.

While all of this heated competition goes on our question is simple. How will it benefit us?

Banking will improve, regardless of whether you stay with your bank or adopt new banking options.

Traditional banks will be under tremendous pressure to be competitive and that will mean some of the simple banking tasks that are now offered at a relatively high cost will be much more fairly priced.  

Competition in the banking sector will be fierce and all of us will benefit.