You want to be the bank of the future, not Apple? Figure out data!

Apple announced the launch of its much anticipated savings account in partnership with Goldman Sachs, which comes which a whopping 4.15% APY. There are two ways I expect Apple’s latest product to truly disrupt banks, in a way fintech startups could only dream of achieving:

• Apple will have a larger impact on interest rates bank offers than what Jerome Powell has been doing over the past 12 months. Banks had no problem dropping rates fast when central banks brought them to an all-time low during the financial crisis. Funnily enough, they’re not so fast to increase them again: Over the last year, the Fed has raised the rates by nearly five percentage points. And yet, the average US APY on savings account remains around 0.23%. Following the SVB bank run, consumers were already more conscious and open to putting their money to work, with US banks recently losing billions in deposits to government treasuries and money market funds. Apple’s high interest offering will only further intensify competition for deposits and I expect banks will no longer be able to get away with abysmally low rates. Why would you keep your money in a bank savings account near 0% APY? Especially if you already have an Apple digital wallet as the transferring process will be seamless.
• Banks could see a nosedive in account openings from Gen Z. Banks are already having a hard time with the young demographic. Not impressed with incumbents’ mediocre digital channels, many already use digital-only banks or big techs (e.g. PayPal) as their primary financial service providers. In addition, consumer trust in banks is at an all time low but nowhere is this more pronounced than with Gen Zers. Apple’s latest launch highlights that consumers can access more and more banking products without having to deal with banks themselves.

Where do banks go from here?

In terms of response, I see a lot of publications covering this story assuming the solution for banks is quite straightforward: increase rates on savings account and build seamless digital experiences younger consumers have come to expect. Yet these treat the symptoms but not the cause of why banks are being disrupted so significantly. The issue with ‘just build a better digital experience’ is that bank’s digital transformation strategies tend to lack focus or coherent overarching goal, spending millions or even billions of dollars making some headway in digitising different services before throwing it all out. See Goldman Sachs’ abysmal foray into making consumer banking more profitable. Perhaps that’s why they’ve partnered with Apple who has been getting it right with consumers for more than two decades…

In my opinion, this all comes down to data. Apple, as any big tech worth its name, has mastered the use of data to maximise customer value. You want to be the bank of the future? Figure out data! Banks sit on a treasure trove of customer data. You can tell a lot more about a person with how they spend their money than what they watch on YouTube. And yet where is this apparent? Where is the personalisation? Where are the customer analytics helping to inform bank strategy? Apple knows its customers. It knows them very well. And you can bet their savings account will eventually come with personalised services, such as helping you reach a particular financial goal or seamlessly transfer between different financial products.

Banks need to anchor their digital transformation strategies with enhancing their data capabilities and then launching specific product exploration and developments around this.Otherwise, banks’ digital transformation projects will continue to face this huge handicap from the start and tech-first firms like Apple will grab bigger and bigger slices of their lunch.