We should be worried about the likes of Google, Amazon, Apple, Facebook, Zynga and others entering the financial data space, because it's all about information warfare. What is information warfare? It's all about viewing data as though it were capital or labour; that is, a raw material for business.
This is key as banks have long held the view that they are data managers. For example, Walter Wriston, CEO and chairman of Citibank from 1967 to 1984, made the statement that: "Information about money has become almost as important as money itself." He was and still is right. Mr Wriston had formed this view that the basis for wealth had evolved from land to labour to information back in the 1970s, when technology first hit the banking system and moved us to an information economy. His successor, John Reed, said that: “banking is just bits and bytes”. The key to all of banking is this recognition that it is all about data management and information leverage. Today, information warfare in banking is critical as financial businesses exist purely as information economies and we fight based on information leverage.
Data relevance
But so do others, such as Google. There are plenty of search engines around, such as Ask Jeeves, Lycos, Altavista and Bing, but Google won this game early on by making algorithmic analysis of data more relevant and organised. And it continues to do this today by making searches contextual and geographically localised. Google is not a monopoly. It has competition, for example Wolfram Alpha, and can only maintain its leadership by innovating.
Facebook is the same. Facebook has had plenty of competition in the social networking arena. Remember Friendster, Friends Reunited, Bebo, MySpace? How quickly we forget these other players when one wins out. However, Facebook is not a monopoly either. It has competition, for example Diaspora, and it will only maintain its leadership through continual innovation and enhancement of its information management capabilities.
Data mining
Which leads me to Amazon. Amazon was all about books, we thought. Sure, that's where it started, but it soon moved from books to music, films and more. The company then got really smart and started to make data mining its core art form. Data mining is data leverage by looking at dataprints. Similar to fingerprints, dataprints are the unique way in which each of us search, buy and consume. These can be related to others' dataprints to find relationships. By doing this, Amazon built its business on finding offers that you might buy, because people like you buy it and they know this thanks to our unique dataprints.
Soon, Amazon was more of a behemoth of data, moving into selling anything from white goods to televisions. And it is easy to sell online, when you know how to leverage data relationships, which is why even this was not enough. Recognising its information leadership, Amazon opened Amazon Web Services (AWS) to become the largest cloud computing firm out there. Amazon now adds server systems to AWS every day that would have been the equivalent of the complete server architecture required to run the total retail business two years ago.
So, that's information warfare – leveraging systems expertise to get more share of wallet, expansion of market, growth of proposition and development of the offer into a range of services with no dependency on one. The reason we should worry about Amazon, Google, Facebook, Apple and others is because they all know how to use information as capital. They are all now pointing their information leadership at money and, bearing in mind that banking is just data as Mr Wriston pointed out back in the 1970s, we should be concerned.
