I found a mixed bag of themes this week as I’m scooping up numbers.
First, some interesting numbers include the fact that Google has 750 people working in their Payments Division, having just hired PayPal veteran Osama Bedier to lead it.
This is at the same time as PayPal hire Blackhawk Network founder Don Kingsborough, to go after the retail store network and take on Visa and MasterCard.
And just as Facebook announce they are opening a Payments Unit too.
Change is afoot.
As one panellist at the conference I'm at this week said, during a discussion of new competitors: “We reached a digital inflexion point in film a decade ago and Kodak did not follow it. Five years later, they made no more film. The business model had fundamentally changed. Banking is at a similar inflexion point today.”
This followed a keynote presentation from Deutsche Bank who alluded to banking being like the music industry.
Music was profitable until the internet killed the radio star by giving it away for free.
Napster became huge during the early 2000’s until two things happened.
First, the legislative battlefield began to close down the illegal distribution of music; and second, Apple launched iTunes to go with the iPod.
In 2004, digital music represented just $20 million of the $25 billion revenues of the industry, as most digital music was being distributed for free.
Since then, music industry revenues have declined by 30% but, luckily, Apple launched iTunes in 2003 and, in 2010, the ten billionth tune was downloaded.
The change in the business model had occurred, from physical stores and CDs to online downloads and Amazon.
Similarly, thanks to iTunes, the business model had proven that you could move from illegal downloading to most people feeling comfortable paying 99 cents for a song to have it legally.
This is why, by 2009, digital music represented $4.5 billion revenues, or 27% of the global music industry revenue flows.
It is also why the songs now cost $1.29 per tune, up from 99 cents.
The business model has changed; the inflexion point has been reached; the world has moved on.
Will this happen in banking?
That’s the question and the answer is:
YES IT WILL!!!!
Google illustrates this with the growth in their payments business which is not a payments business.
Google are growing their Payments Division primarily from their focus upon the advertising profit pool, rather than necessarily making profits from payments per se.
The business model has changed.
And it’s changing fast.
For example, Techcrunch published one article last week that stunned me with its opening lines:
- Facebook has over 600 million users;
- Twitter had 25 billion tweets last year;
- Tumblr has a billion page views a week; and
- Zynga reached 100 million users on Cityville in just six weeks.
Critical mass can be reached in days, and businesses can be wiped out overnight.
Just ask Tower Records.
Meanwhile, as we see this growth in social networking – Facebook gets 30 billion pieces of new content every month! – much of it is being driven by women, who represent £13 trillion in consumer spending and, by 2025, will control 60% of the UK’s private wealth according to Odgers.
If Comscore says women are the majority of users of social networking sites and spend 30% more time on these sites than men; with mobile social network usage being 55% female, according to Nielsen; then I’d take a close look at this as a bank.
And I'd take a close look FAST.