I first speculated that Apple might one day become a bank almost a year before the launch of Apple Pay. What triggered that thought was the use of Touch ID for iTunes purchases and the depth of security involved in the secure enclave used by Apple’s fingerprint system. It was clear even then that Apple had big ambitions in the mobile payment field.
Now that Apple Pay has launched, and already proven a big success, I think the argument for Apple to make the move are even stronger. So here are seven reasons I think Apple may become a bank within the next five years …
1. People hate existing banks
Ok, that’s something of an exaggeration, but not too much of one. It wasn’t like banks topped anyone’s most-loved list even before the banking crisis, but the resulting financial crash put bankers onto pretty much everyone’s hate list. A three-year study of millennials found that all four of the leading U.S. banks were in the ten least-loved brands.
Many people stick with their existing bank for only two reasons: changing banks is a hassle, and they don’t think any other bank would be noticeably better. Those two factors make people look way more loyal to their bank than they really are. Offer them a truly better experience, and a hassle-free way to make the move, and I think many people would switch.
2. People love Apple
Apple’s brand image couldn’t be further removed from that of the average bank. And while Apple’s credentials might not seem to easily translate to banking, there’s one area where Apple’s reputation would mean a great deal: customer service.
Banks are usually dreadful at customer service. They seem to prioritize their own systems and procedures over the customer experience almost every time.
I did actually recently go through the hassle of switching business banks because my old bank not only managed to reject an incoming international payment, it was completely unable to explain why. I logged a complaint, and its complaint-handling was even worse than the original mistake. Mentioning it to friends, this kind of experience appears far from unusual.
Apple’s approach to customer service is up there with the best in the business.
3. Apple is winning mobile payments
Mobile payment was around for many years before Apple Pay, yet adoption in most countries had been extremely low. Apple changed that story almost literally overnight, Tim Cook reporting that the company more than doubled the size of the mobile payment market in just 72 hours, with a million card activations.
Apple is even effectively acting as a financial gatekeeper, deciding which banks and cards are good enough to be accepted into the program.
4. Apple has the right technology
One of the key reasons Apple Pay has taken off so fast is because Apple Pay offers a greater level of security than any other payment method. It offers the convenience of contactless cards – fantastically convenient but with very few safeguards – with the best security in the business.
The gold standard for card security had, until Apple Pay, been the chip-and-PIN cards used in Europe. Transactions have to be validated by typing in a PIN, with rolling encryption protecting the data stored in the embedded chip. It’s a very secure form of payment – but Apple Pay beats it in two ways.
First, while a PIN should guarantee its the cardholder making the transaction, Touch ID actually does so (low-likelihood hacks aside). Second, while chip-and-PIN hands over your actual card details to the payment terminal, Apple Pay transmits only a one-time code, meaning you don’t have to worry about the retailer’s database being hacked.
5. Apple also knows how to do UI
My bank, unusually, gets a lot of things right. But its mobile banking app is a mess. The user interface is just horrible, and even if I’m logging in on my Mac, I still have to use the iPhone app to generate a code – so I can’t escape that UI.
If there’s one thing Apple (usually!) knows how to get right, it’s the user interface. The right tech working in the right way is going to be appealing right now; factor in a future where banking, like everything else, is going to get more and more hi-tech, and Apple’s UI strength becomes ever more important.
6. Apple has the financial resources
Apple is the largest company in the world. It has enormous cash reserves. Those two facts should make getting the necessary regulatory approvals a done deal, and also lead to extremely high levels of consumer confidence.
7. Younger consumers are ready & waiting
Two recent surveys suggest that millennials – those aged 18-34 – would be more than happy to consider a tech giant like Apple or Google as their bank. The three-year study I linked to above found that 73% would be more excited about a new financial services offering from a large tech company than they would one from their own bank. A separate survey suggests that around half of millennials would specifically be willing to bank with Apple or Google.
Put these reasons together, and I’d put money on it that Apple is at least considering the idea. As with anything Apple considers, that doesn’t mean it will actually do so, of course – and there is one very strong argument against my thesis. For all Apple’s move into services like Apple Music, it is first and foremost still a hardware company. Not only that, but an extremely focused hardware company, famous for saying no to a thousand different ideas for every one time it says yes.
So I don’t think it’s a foregone conclusion. But I do think the arguments for outweigh the arguments against, and that those arguments grow stronger with every new Apple Pay customer. I’m not going to go so far as to say it will happen – but I do think it’s at least a strong possibility.
Am I right, or am I crazy to even think this could happen? Take our poll, and let us know your views in the comments.