If Tower Records = the incumbent banks and iTunes = challengers, who is Spotify? Alessandro Hatami, Managing Partner of Pacemakers.io explores for us.
Any bank that right now is thinking about digital evolution has to be conscious that if they do not shape up and look exactly what's possible, they could potentially find themselves as dumb pipes a provider of financial services to a platform that owns the relationship with the customer.
Many of us are familiar with the Tower Records, or the Virgin Megastore on the Champs-Élysées and so on. These are amazing stores that were created there to fulfil a need, which at the time was seen as selling music and selling entertainment. When iTunes came out, most of these store responded by saying that customers don't actually want just buy the music, they don't like the very transactional nature of iTunes, they like to come into the store and then flip through these amazing containers of vinyl and CDs and choose the one that's right for them.
iTunes came about and all of these stores, within five years of iTunes launching, started going bust. What happened there is that they dominated the industry and the purpose of their business was that: of selling specific music. And then Spotify came in and Spotify said, 'Well, actually, people don't even want to buy music, they want access to music, and they want to be able to listen to it whenever they want, on whatever they buy device they choose'.
To this day, they completely upended the industry and the music industry completely changed. And one could say something similar is happening in banking. So if you accept the analogy that Tower Records is the equivalent of an incumbent bank. And if you accept that iTunes is the challenger bank, the big question we all have now, who is Spotify?
It's very unlikely that a bank will be able to create the capability of managing UX and managing engagement as well as some of the big social platforms. But it's not unlikely that there is a smaller firm that is not one of these platforms that can complement what the bank is doing in helping them develop that proposition.
So, in my mind, what I think right now is happening is the opportunity that the banks need to take on, which is that of collaboration, think about yourself as the owner of the relationship with the customer. And the proposition development could be done with with partners. My fear in this environment is that going back to the iTunes and Tower Records analogy, is that if iTunes and Tower Records worked together, they wouldn't have been able to stop Spotify.
Alessandro is an entrepreneur, corporate executive and board member with an extensive background in general management in banking, financial services and payments, and a track record of delivering growth through digital innovation at companies including GE, PayPal and Lloyds.