23 July 2015
Are Apple and Google safer than the banks?
Imagine a world where the most popular bank in Britain is not Santander or First Direct, but Apple. Last week, the technology company launched Apple Pay in the UK - an innovation which lets you use your mobile phone to make payments in the same way you might use a contactless debit or credit card.
If you've used Apple Pay already, you may be wondering what all the fuss is about. After all, reaching for your phone is not much easier than reaching for your wallet. But one clear advantage that Apple Pay has over contactless cards is its security.
If you use your Apple phone to pay, it can identify you by your fingerprint. In contrast, a contactless debit or credit card that drops out of your wallet can be used by anyone who finds it.
The safety net for contactless plastic is that transactions are currently limited to just £20. And if you start tapping a contactless card too much, you eventually get asked to revert to Chip & PIN.
But new research from Which? this week has revealed that contactless cards could pose a bigger security risk than previously thought. Without too much hassle, the Which? team managed to buy a device that could read the data emitted from contactless cards and then use this to make much larger transactions onliine. In one case, the researchers managed to buy a £3,000 TV - without even having the name of the person whose card details they'd intercepted.
Although this shouldn't be of any concern to customers - as banks are legally responsible to pick up the tab for card fraud - the timing of the Which? research couldn't be better for the likes of Apple, which launched its new securer Apple Pay system just a few days ago.
Until now, the main obstacle to technology companies challenging our banks in any serious way has been consumers' lack of trust in these brands combined with concerns around security. While people may not love their banks, they take comfort from them being large organisations who specialise in the business of moving money. Swapping HSBC for Apple would feel like a leap out of most people's comfort zone. But that gap is quickly closing.
What would Apple Bank look like?
Apple Pay is no big deal. I'd be surprised if it transformed the payments market. But it's a foothold in the UK financial services indusrty for one of the world's best loved brands, and it's hard not to speculate what might come next.
What many people find intoxicating about Apple in the technology space is its promise to constantly challenge the status quo, and to produce products that make people's lives simpler.
Having an iphone has transformed my life (not always for the better, I'll admit). I can check whether my bus is coming before I get off the tube, so I know whether it's worth going out of my way to the bus stop. I can Facetime my daughter from anywhere I can get a good 3G or 4G signal. I can reply to emails while I'm travelling. I can even trade shares or gamble while I'm out and about.
So what might the world of banking look like if it was run by Apple? Not only would payments be quicker, but managing your money effectively would be simpler. Apple could analyse your transactions to help you work out where you were overspending or where you could get better deals elsewhere. Indeed if they bought the same philosophy to banking that they live by in the world of phones and music, then Apple might even manage to make money more interesting - and get more people engaged with their finances.
Would you trust Apple with your money?
The missing piece in the jigsaw for me is no longer trust. I would trust Apple to look after my money just as much as I'd trust my bank. But Apple are not yet known for their customer service - except when they're trying to get you to buy their products in their high end high street shops. Apple technology generally speaks for itself so there's no need to deal with the company once your device has been bought. But when things go wrong, their service can leave a little to be desired.
But these are hurdles that they could surely overcome.
With lower overheads, a captive audience and none of the legacy issues that the big established banks have - it's not hard to see a reality where an Apple or Google take control of our banking sector.
It's an industry that is ripe for some true disruption and some radical innovation. None of the challenger banks have yet offered anything truly distinctive - they are mostly offering a friendlier version of the same old services. Dog bowls at Metrobank, lounges at Virgin Money - but no one has turned banking on its head.
You can guarantee that an Apple bank would look nothing like the offerings out there today. I'd love to see it become a reality.