Biting Into the Financial Services Sector

By Richard Goold, Partner at transformation consultancy Moorhouse

Trust takes a long time to build, but can be destroyed in moments – a salutary lesson which many financial services (FS) organisations have learned over the past few years as they’ve been buffeted by scandal after scandal. But for those businesses who have earned and carefully nurtured the trust of their customers, it can help propel them into new – potentially lucrative – territory.

Apple is one such company that has built an enviable level of goodwill from its customers and this in turn has allowed it to continue to be agile and innovative. Its consistency of service over the years has built it a solid fan base which is very forgiving of the occasional misstep, such as snags initially experienced when a new handset or new operating system is rolled out. Apple has now entered the financial services (FS) market with its recent launch of Apple Pay, a digital service that allows consumers with the right iPhone or Apple Watch to pay using the same terminals as contactless card readers.

This marks a big change for Apple, but it may not be the one that immediately springs to mind. While its first steps into FS are notable, what is more interesting is the fact that this is the first time that Apple is now dependent upon other organisations to deliver something with the Apple name on it. Apple is known for the careful management of its supply chain and its strict control means that everything it delivers is of the high standard that its customers have come to expect. But now, as a transactions provider having to work with payments processors such as AMEX, Visa and MasterCard, Apple is to some extent at the mercy of forces outside its control. Payments via Apple Pay are already set by limits on the contactless terminals, due to increase from £20 to £30 in September in the UK. Interestingly, Apple Pay is more secure than payments made by contactless debit or credit cards as it uses tokenisation – meaning that transaction-specific codes are used for payments, rather than revealing a card’s full details. But consumers wanting to make larger payments could become frustrated with Apple if they don’t understand that the payment limits are not set by Apple itself.

The launch of Apply Pay was also slightly tarnished by some providers having to delay their customers’ access to the technology, despite having initially said they would be able to use it as soon as it launched. HSBC was one of those providers and, luckily for Apple, customer dissatisfaction was very clearly aimed at the bank. But it goes to show how easily unexpected problems can crop up and Apple will have to carefully manage issues such as this to ensure that they are not blamed for problems outside of their control. Compromise and humility will be key as Apple relinquishes control for the first time.

The lines between the FS and technology, media and telecoms (TMT) sectors will continue to blur as the regulatory environment encourages non-traditional firms to enter the sector to provide consumers with better products and services. While legacy banks are facing threats to their market share from challenger banks, both are under pressure from companies such as Apple who are able to capitalise on consumers’ increasing trust in, and reliance on, technology to manage their financial affairs. We will see more collaboration like this as companies come together in new and unexpected ways to deliver more innovative products and services for customers.

While the wallet isn’t dead yet, Apple Pay extends the power of the handset. We’re not far off from seeing docks in cars to allow handsets to slot in and act in a variety of ways, from a GPS, to showing fuel consumption. But advances like this will hinge on successful collaboration between previously unlikely bedfellows.

Apple Pay has been embraced by consumers, but rather than marking a sea change in the FS sector, it marks a new way of working for Apple. This willingness to collaborate with other organisations, rather than control every aspect of a product or service, opens up exciting new possibilities for Apple and its customers. But in order to continue its success and maintain its status as a brand loved by consumers, Apple will have to carefully manage the reputational risks stemming from no longer having complete control over every aspect of its products and services.