Financial services organisations aren’t technophobes. Technology has enabled advances in modern banking with the likes of Big Data and digital signatures reaping benefits for banks and their customers. On the other hand, legacy banking systems are cumbersome and for some banks, technology integrations are costly in time and money. In the financial services sector, it has long been this way. However, what happens when technology giants skip the banking middleman and launch financial products themselves?

Apple launched Apple Pay, its mobile payments system this month, taking on the incumbent Google Wallet system. Google already has banking licenses for the UK and Facebook could soon provide remittances and electronic money to users, providing them with the power to transfer cash between each other. Alibaba, the Chinese combination of eBay and Amazon, already allows users to deposit funds, make investments and take out loans. The user figures for all of these networks and brands are huge and pose a real threat to traditional financial services organisations.

Listening to or listening in on customers?

Banks are not alone in their concerns. Even insurance companies like Allianz are preparing to enter the battle, as they are no longer untouchable in their usual areas of expertise. Previously, they held personal contact with their customers, storing information about hobbies, family status and employment. Now, all this information is available on social networks. Even if users have their settings at the highest possible privacy, Facebook, Google and the like are sitting at the source of all this coveted customer data.

This presents an immediate issue for the financial services, as they now need to develop  relationships with their customers. Banks previously held interaction with customers via bank branches, which offered an area for direct, personalised customer service. The rise of online and mobile banking has disrupted this, and mobile giants like Apple recognise the opportunity to communicate with customers as and when they require. The fact that customer data is readily available for search engines and social networks mean they are an important step-ahead of established financial service organisations when it comes to customer communication.

The choice lies with the customer

Banks have to react and provide exemplary customer service. This means communicating with customers through the medium they demand: in-branch, online, via mobile or with paper statements. Banks should not be the ones to decide how this communication takes place; the choice lies with the customer. Large technology firms with expertise in retail like Amazon recognise that a happier customer is a loyal customer. Listening to their demands and providing accordingly is a simple way to keep them coming back for more. It shouldn’t be any different for banks.

The Apple doesn’t fall far from the tree

All that being said, technology companies are still suffering from similar troubles to banking incumbents. Apple Pay, only recently launched, has already suffered a glitch which saw some Bank of America credit and debit-card users charged twice for the same purchase. The bank said that about 1,000 transactions were affected. Teething problems, perhaps, but banking glitches are something the likes of RBS recognise all too well.

Technology brands are at the early stages of entering the financial services market. Banks need to keep an eye on this development as whilst they’re safe for now, things can change swiftly. Technology continually advances and financial organisations are notoriously slow to change. Customers will flock to organisations that are making the most of technology for the benefit it provides them, and late adopters will be left behind. It will be interesting to see how Apple Pay plays out and how the likes of Google will react, but banks need to take the fight to them. The vital weapon in this fight is the customer - and banks need to protect every aspect of their experience.