Lenders face the tech test
Britain’s Big Four banks have enormous advantages over challengers. scale means that they control huge amounts of data which, with the use of artificial intelligence, yields valuable information about clients.
in the case of Barclays and HsBC in particular, the creation of ring-fenced banks means they have stores of lockedin cash which they use to offer the most competitive terms for mortgages.
now that most issues of bad behaviour are out of the way, royal Bank of scotland and Lloyds should be able to stump up tons of cash in spite of super-low interest rates.
there is no room for complacency. trendy tech challengers such as Monzo, revolut and starling are nibbling away around the edges. But there is a view that making real profits is incredibly hard because they are giving away too much for free.
the bigger danger for the High street banks is that they will be bypassed by more substantial players.
it was a signal moment when Worldpay (once part of natwest) was bought by Fidelity national in the Us for £29bn. at that price it has a similar market value to rBs, and it shows how quickly the interlopers could eat its dinner.
Even more scary are the advances being made by apple, Facebook and amazon in finance. they have even more data about most of us than the banks.
rBs et al have no choice but to invest in better technology. not only do they have sclerotic systems but they are having to invest in new applications.
One choice might be to buy fintech rivals. rBs decided to take a different route with the launch of Bo, which targets 16.8m customers with savings of under £100. it would plan to offer this group cheaper credit by amassing deposits and slashing costs.
initially this might be seen as an excuse for rBs to lower overall costs by cutting staff and closing branches. this in the week that spanish-owned tsB has been in the stocks for shuttering outlets.
the UK must have a decent branch network to serve the needs of small businesses and the nation’s silver army. But the commercial reality for new rBs chief executive alison rose is that standalone Bo, using big data to capture a particular cohort, is the more realistic answer if silicon Valley is to be kept at bay.
Kicking off
PriVatE equity firms are not known for overpaying. We must assume, then, that silver Lake knew what it was doing when it invested £388m in Manchester City, placing a current market value of £3.7bn on the Premier League champions and making it the most expensive sports club in the world.
it is the biggest deal for a sports enterprise since Liberty Media took over Formula 1 motor racing in 2015 for £6.2bn, with the promise to ramp up revenues by taking it digital.
Man City’s biggest investor, abu Dhabi royal sheikh Mansour Bin Zayed al nahyan, must be cock-a-hoop having bought the club for just £200m a decade ago.
Even if one adds £1.3bn of investment in stadium, facilities, players and managers, that is an enormous gain. there is no shortage of money in the arid, energy-rich state. the attraction must be the opportunity to spread ownership to the Us, where Premier League soccer vies with the nFL, baseball and basketball for airtime. top-class sport is a big come-on for cable television.
sports franchises rarely remain pre-eminent for ever. Manchester United has sunk down the earnings league. the new York Yankees have not won the baseball World series since 2009. City’s success partly has been built on the genius of Pep Guardiola but he is not going to be around for ever.
the biggest risk comes from technology. the cost of tV rights for Champions League football has peaked. streaming means that the computer-literate can watch the Premier League football on laptops for next to nothing. City also is under European investigation over its finances.
silver Lake may know something we don’t. But this could be an own goal.
Body parts
rEMEMBEr relx? it is the £36bn FtsE100 electronic media giant which has outperformed the index for the past eight years.
it continues its transformation from print to tech with the purchase of 3D4Medical in Dublin, which uses 3D graphics to help students and teachers study anatomy.
Cool!