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Facebook and Apple Will Fail if They Launch This Product

Many have speculated Apple (NASDAQ: AAPL  ) , Facebook (NASDAQ: FB  ) , and Google (NASDAQ: GOOG  ) could take down the biggest banks if they moved into the financial landscape. But one recent survey revealed the technology firms would face a long and difficult battle if they ever made such a bold move.

The bright belief
All signs are pointing to the three technology titans entering the payments landscape. Google already has a position through Google Wallet. Facebook is reportedly preparing to obtain regulatory approval in Ireland, which would allow it to issue digital credits that can be turned into cash. And Tim Cook of Apple said plainly in January, "[T]he mobile payments area in general is one that we've been intrigued with, and that was one of the thoughts behind Touch ID."

Knowing the likely movement of the companies into the payment sphere, the next supposed step would be into the actual banking industry.

After all, more than two years ago popular technology website Gigaom ran a story titled, "What is the next industry Apple can disrupt? Banking!" And in 2011 Businessweek ran "Facebook, Your Future Bank." And of course Google has its Wallet functionality, which in some ways allows it to mirror a bank.

With all that in mind, it's easy to think the banking industry is poised for disruption. But the three firms may face a tougher battle than anyone would like you to think.

The troubling truth
In a recent survey, consultancy Accenture found just 27% of individuals in North America would consider banking with an institution that didn't have branches. Of course, Google, Apple, and Facebook could build their own branches if they wanted to, but that would likely fly in the face of the Silicon Valley lure they offer. And that was just the beginning of bad news. 

Source: Accenture.

In addition, as shown in the chart to the right, consumers across the globe simply trust banks more with their personal data than everywhere else. While Google ranked higher than Apple and Facebook, the reality is, just 23% of people trusted it relative to the 41% posted by banks.

While this shows the hesitations people have when it comes to their data, the reality is, privacy concerns would be a major limiting factor for those firms in the technology industry.

Although 29% of individuals in North America said they would consider banking with Google or Apple if they offered the service, the reality is switching banks isn't something people do often. In fact, just 12% of people in mature markets had "switched to another bank for their primary account or other products within the past year."

And while banks face challenges in the future the study noted:

[B]anks also possess inherent competitive advantages in the digital world. They have large and relatively "sticky" customer bases; vast amounts of customer and transaction data; and valuable know-how in the field of payments, security, compliance, and financing -- all of which are difficult to replicate.

The thought of Google, Apple, or Facebook expanding into the banking world may seem to present an appealing and massive opportunity for both consumers and shareholders. But the reality is more and more signs reveal the such moves would likely be more difficult and costly than any of us first thought.

Banks + Apple? This device makes it possible.
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its destined to change everything from banking to health care. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early-in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here

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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 29, 2014, at 1:10 PM, Redskins142 wrote:
  • Report this Comment On June 29, 2014, at 10:13 PM, PhilipCohen wrote:

    Agreed, if anyone that thinks that any of these “payments hopefuls” are going to have any serious chance of taking retail payments (or banking functions per se) away from the licensed financial institutions and their “bankcards”, MasterCard and Visa (with their new digital wallets extensions, “MasterPass” and “”), they are seriously delusional …

    Notwithstanding that eBay’s clunky “PreyPal” has had a ten year head start providing an online payments service, it still only represents about one percent of total payments, and “MasterPass” and “” will undoubtedly ultimately drive “PreyPal” back into its mandated eBay pine box alone; “PreyPal” at physical point of sale is simply a joke, and eBay’s subsidizing of such installations is a total waste of eBay’s shareholders’ funds—is it any wonder that the eBay shareholders have never had a cash dividend …

    eBay Inc, where the incompetent mingle with the malevolent and the outright criminal, and the just plain stupid ...

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Patrick Morris

After a few stints in banking and corporate finance, Patrick joined the Motley Fool as a writer covering the financial sector. He's scaled back his everyday writing a bit, but he's always happy to opine on the latest headline news surrounding Berkshire Hathaway, Warren Buffett and all things personal finance.

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