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October 9, 2012

Facebook and Google will shape the future banking industry say analysts

Gartner says digital mega-firms are masters of data management and analytics.

By Tineka Smith

According to Gartner, predictions that digital mega-firms will push aside mainstream banks will not happen.

The firm’s analysts predict traditional banks will maintain their place over online-based rivals but that digital firms like Apple and Facebook will help shape the future financial services industry.

"The evolution of the Internet continues to raise questions about the continued viability of brick and mortar establishments in retailing and financial services," said David Furlonger, vice president and Gartner fellow. "Increasingly, Internet-oriented mega-firms are seen as the commercial enterprises of the future. However, as far as retail banking is concerned, it would be like trying to hammer a square peg into a round hole, this just does not fit."

Companies like Google and Facebook are experts in analytics and customer service.

According to Gartner, digital giants have the ability to identify new opportunities and redefine their business models. Their skills in data management, technology and business allow opportunities for these companies to venture into new industries.

Gartner says that digital mega-firms will alter the way the banking industry develops by making consumers better informed along with eventually providing niche financial services themselves.

Furlonger says that banking institutions need to understand the importance of moving away from traditional models and adapt.

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"Traditional models no longer apply to many of their customers or markets. They have a series of questions to address – do they simply copy the new opposition, do they try and exert influence over the broader market, do they look for help and partners, do they need to fundamentally restructure?" said Furlonger. "For many existing financial services institutions, mapping out the path to the future is proving extremely difficult and challenging."

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