Where will we see the next major innovation in financial services?

Apple Pay was launched a decade ago. It now has over half a billion users globally. Google Pay Developers isn’t quite as large, with around 150 million users, but this is still a significant user base. Can you imagine going back in time a decade and suggesting to an executive from Mastercard or Visa that Apple would have over half a billion people using their payment system soon? Apple - the iPad and phone company. They would have just laughed because payments had always been managed by companies embedded in the financial services industry.

A quick glance at American Banker magazine shows just how much the industry is changing and the influence of major tech companies. Amazon, Apple, Alphabet, Meta, and even X are all making noises about financial services - or they are already offering services. Amazon is the tech giant that is mentioned most often by the financial analysts. They already offer Amazon Amazon Cash, so people can maintain a cash balance with Amazon. They offer Amazon Pay, which is a digital wallet similar to PayPal. They are already offering loans to small businesses, and they are launching an Amazon credit card.

Amazon has built a network of over 200 million Amazon Prime members - loyal customers who pay for additional services. Imagine if they offered all these customers a simple checking account that worked in their day-to-day life, but also offered discounts when ordering products from Amazon. Cornerstone Advisers surveyed millennials in the US about the idea of a bank account from Amazon and 83% said they would use it.

This is just a brief look at innovation in finance, but it is clear to me that the reality for financial services is going to be far more complex than just fintech against the traditional brands. There are at least five major factors that are important for success in this industry - beyond competence and services alone:

• Brand: We are talking about finance so the brand has to be trusted. Companies like Amazon and Apple already have this trust. Look at how Apple customers take the sticker they receive when buying a laptop or phone and they then stick it on their car. They are saying, “I am in this tribe.” Brand reputation is essential for financial services.
• Scale: Many of these relatively new entrants to financial services are already handling networks with tens or hundreds of millions of customers. Companies that already have existing networks, such as Amazon Prime, have a huge advantage when planning a new financial service.
• Appeal to the younger demographic: Beyond brand alone, the service needs to connect with younger consumers who are digitally native and comfortable with innovative new services. It’s also a fact that most customers of financial services will stay with a brand they know and trust, so connect with customers as early as possible and they will stay with you a long time.
• Technology: Cloud, AI, data analytics, personalization are all essential components of a modern financial product. These services need to be easy to use, and available 24/7 however the customer wants to engage with the service provider. This gives an advantage to companies that have deep experience with these technologies.
• Innovation: It is important to explore new ideas. Bank accounts and credit cards are products that have existed for decades - if not longer. When customers want to explore cryptocurrencies or virtual property transactions then are trusted and reliable brands ready to help with new areas of the financial services industry?

At present all these factors point to the major tech companies. They have the technology expertise, they have the customer base and networks, and they have the financial muscle to launch new services. But even the tech giants can struggle with regulation and compliance - it can take years to build a successful financial service, which is very different to the ‘move fast and break things’ tech culture.

There is innovation taking place all over the world and there is a very strong possibility that something or someone new will arrive in this industry just when we didn’t expect it. The future of financial services is not just about disruption. It is about creating meaningful experiences that build lasting relationships with customers. In the end, the companies that will truly thrive in this evolving landscape are those that understand that financial services, at their core, enable people to achieve their goals. This requires more than just innovative technology – it demands a deep understanding of the customer experience.