Banking and the E-Book
Moment
By Warren Mead
Partner, Head of Challenger Banks and Global Co-Lead FinTech, KPMG
Cast your mind back to 2007, the year that saw the launch of the first-generation
Kindle. At that time e-readers were widely available in electronics stores but there
was no real indication that a revolution was about to sweep the publishing industry.
The merits of the e-book were widely discussed by book buyers, but the printed
word still reigned supreme – digital consumption was very much a minority sport.
Fast-forward to the present day and both readers and publishers are in a very
different place, and sales of e-books have rocketed. According to figures published
by Statista,
1
the US digital book market was worth just US$0.27 billion in 2008, but
by 2015 that figure had risen to $5.69 billion. Physical book sales haven’t collapsed;
what we have seen is digital publishing taking a rapid route from the periphery of
public consciousness to the mainstream in less than 10 years. The e-book is now
part of our lives. It’s a journey that reflects the willingness – and eagerness – of
consumers to embrace convenience even where this is made possible by complex
new technologies, delivery channels, and business models. And this journey is
currently being echoed in the financial services industry.
The Shifting Financial Landscape
The world’s major retail banks still dominate the financial services landscape,
providing the deposit, payment, and credit facilities that we all use and take for
granted, but they are no longer the only players in town. Today’s online shopper
might pay with a debit card but equally they might choose PayPal. The business
that would once have relied on its bank for credit can now borrow from peer-to-
peer (P2P) platforms or specialist lenders. And digital banks are vying with their
bricks-and-mortar counterparts for customer deposits. It’s all about access and
convenience.
1
Revenue from e-book sales in the United States from 2008 to 2018 (in billion US dollars), http://
www.statista.com/statistics/190800/ebook-sales-revenue-forecast-for-the-us-market/.
As alternative finance gains traction with customers, FinTech is approaching its
e-book moment – the point at which a critical mass of consumers and business
customers see the technology-driven solutions offered by new players in the
marketplace as a viable – and often preferable – alternative to the services offered
by incumbent banks.
The implications for the traditional banking industry are immense. Developments
in FinTech have the potential to erode the brand equity of the incumbent players
and eat into market share. But banks also have an opportunity to embrace FinTech
innovation and offer new solutions to their customers.
An Unfinished Revolution
Anyone seeking evidence of the potential market power and reach of technology-
driven finance providers need look no further than the now venerable PayPal.
Launched in 1998, the company was taken over by eBay in 2002 and became the
default payment system across all of the online auction operator’s international sites.
Since then PayPal has expanded its offering and it now sits alongside debit and
credit cards as a payment option on an ever-increasing number of e-commerce
sites. Whether that online performance will translate to dominance in face-to-face
transactions remains to be seen. Today, the company boasts more than 100 million
active accounts and processes an average of US$315 million in payments every day.
2
The payments market is evolving fast and this evolution will chase convenience,
speed, and data collation. Witness the initial success of Apple’s contactless
payment system Apple Pay, which allows consumers to purchase and pay for
goods and services simply by placing an iPhone 6 in proximity to a point-of-sale
terminal. Apple Pay is just launching in the UK, but it currently accounts for US$2
out of every $3 processed by contactless systems in the US.
3
One of the single greatest obstacles is ubiquity – the consumer can be faced with
a myriad ways to pay. We are now witnessing a global wave to introduce 24/7
2
Paypal Company Statistics, http://www.statisticbrain.com/paypal-statistics/.
3
Bloomberg, “Apple Sees Mobile-Payment Service Gaining in Challenge to PayPal”, 28 Janu-
ary 2015, http://www.bloomberg.com/news/articles/2015-01-27/apple-sees-mobile-payment-
service-gaining-in-challenge-to-paypal.
6
IntroductIon
6