A few months ago I heard Francisco González, the head of BBVA, say at a conference: “We are not a bank. We are a tech company.” And that at the time blew me away, because I hadn’t realized up until then that what the big banks deal in these days is not money, but data. Ok, so the data represents money. But actual cash? No, most of what they’re moving around is bit and bytes.
This morning the Financial Times published on its front page excerpts from an interview with Ana Patricia Botín, her first interview since she took over from her father as Executive Chairman of Santander Group. The main surprise announcement was that her bank, Santander, is going to offer cloud storage to its corporate clients. A bank, a very big one at that, is going into the data storage business.
Now, all this talk about data and money may sound not very exciting. Until you start to think about the blurring lines. And what money actually is. And what data actually is. And then you get dizzy and have to go and sit down for a while.
Now, I’m not a banking analyst, but I am a bit puzzled as to why Ms. Botín feels that she has to compete against what she terms “the big four guys”, Apple, Google, Amazon and Facebook. They pose a threat, she says. To what? Her quest for world domination? (I’m not saying she has such a quest, I am merely wondering what she thinks they might take away from her.) Ah, it turns out that it’s about market capitalization. She goes on: “It is not the banks, it is these four large tech companies that are worth more than us.”
She’s actually not just talking about market cap. Her bank is a business, which needs clients. And it’s understandable that she worries about the big four taking clients away from her. Apple Pay is a financial service. Amazon issues credit cards and gives loans. Facebook is developing an e-currency and is moving into online transfers. And Google seems to be looking into moving into just about everything.
But, the difference in market cap between the banks and the “big four” is actually about data. What do the big four have that justifies their staggering combined market value? Loads and loads of data, about us.
Santander, being a global bank, also has lots of data. It knows when we take out money, it has access to our credit card transactions. But there are gaps in its knowledge, and the rise of alternative online payment platforms is keeping valuable consumption information away from the banks’ servers. And with increasingly innovative competition flourishing in the lending sector, the big banks understandably see a threat to their knowledge of what we are spending on and investing in.
The big four have more data. That makes them more valuable. Because data is what counts, now. Most purchases are handled by data, not by “real” money. Cash transactions have dropped to about 40% of consumer spending, and that amount looks set to fall rapidly over the next few years as ecommerce continues to grow (powered by Amazon and possibly soon Facebook), and new payment platforms (including those owned by Apple, Google and possibly soon Facebook) make mobile transactions easier and cheaper. And that’s not taking into account the emergence of digital currencies.
Banking is not so much about money any more. It’s about data. So, instead of storing money, banks store data. Santander has invested over £230m in a huge new data storage facility in Leicester. And it plans to offer surplus storage space to its corporate clients, to take advantage of the rapid migration to cloud computing. As far as I can gather, it’s not clear whether this will be a separate income-generating division, or simply a “sweetener” to retain or attract corporate accounts.
The puzzling part is the need to go after the “big four”, as Ms. Botín puts it. “I don’t think of us as defending ourselves. I think of us as a challenger, an attacker.” Why tackle such a steep mountain, with so many threats nibbling away at Santander’s already steep base? Does she really think that she can overtake the tech giants? Unlike Santander, Google and Facebook are exclusively in the data business. Of course they’ll always have more data to store. And Apple and Amazon reach parts of the earth that Santander cannot reach. Of course they’ll always process more transactions.
Maybe it is a bit about world domination. Does Santander really expect to end up with the same number of clients as Apple, the same number of users as Google, the same amount of transaction data as Amazon or the same amount of personal information as Facebook? And if so, how are they going to go about that? And how comfortable are you with the idea of a bank having that much influence?
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