In this second post, will show how companies will try to defend themselves from these new entrants and in doing so, potentially move into new financial areas.

Avoiding “platform envelopment”  – Google up!

To avoid being enveloped (i.e Microsoft kiss of death) platforms bundle up with more and more services, since the consumers thus will valuate the platforms higher. The perfect example of this, is Google, which is perfectly shown by the following image:

To protect themselves, while generating new growth, Google have kept on adding new services to their platform, now Google is much more than a search engine, they offer e-mails, maps, translate, youtube, all value added services to their existing offerings. Now, Google in moving into the financial world, with Google Wallet and Android Pay.

What are the existing mobile payment applications doing?

MobilePay by Danske Bank, is already started to “bundle” up with new services, offering a strong bundle, which Apple, Facebook, SWIPP and Google currently cannot compete with. As the following image shows, MobilePay is offering a bonus program, a receipt function and the new cooperation with POWA-Tag which will allow for totally new ways to purchase goods.

MobilePay bonus, could easily be seen as MobilePay’s first move into a wallet-like function, since bonus-coins are stored in the MobilePay applications, thus you now have to use MobilePay, to get your bonus points/cash. When consumers gets used to this function, more similar functions could be launched in the future, such as a savings accounts or quick-loans!

Seeking inspiration from the East

In China, they have a very popular social media platform with more than 600 monthly users, the application is called WeChat. WeChat really understand the possibilities of bundling and within the WeChat application there is a chat function, a Facebook-copy, Istagram-copy, possibility of reading news papers, ordering taxi and much much more.


In 2013,WeChat added the possibility of adding a payment card to their application, allowing for online and offline purchases, the service has since been constantly updated. However, in 2014 WeChat created a savings function to their application.

I can tell you, the application became very popular, but just think for a minute, how much do you think was added to the WeChat savings account?



First day 130 million US-Dollars was deposited, a year later more than 16 BILLION US-DOLLARS have been deposited by more than 10 million users! 

So you might think, why is this a threat to the banks in Europe or US? Well, the following from Facebook quote should make this quite clear:

We are one percent finished (with Facebook Messenger) – One day, there will be companies built on facebook Messenger, and we are at the beginning of that ecosystem”  Julien Codorniou, Facebook’s director of platform partnerships

It is not hard to understand where Facebook might be getting their inspiration from, that is most likely from applications such as WeChat. And looking at the following profits, one should ask, why should Facebook/Apple/Google not try to get a hold of some of the profits from the financial sector?

Danske Bank profits Q1 2014: 8.6 billion DKK

Facebook profits Q1 2014: 3.5 billion DKK

Facebook, the platform with more than 1.5 billion active users, thus has a smaller profit than (small)Denmark’s largest bank, why should Facebook not move into banking? Remember Facebook already have launched “FacebookPay”.

A disruptive move up-market

Payment platforms such as MobilePay and SWIPP will have to add features to their existing solutions in order to offer a more attractive bundle than what ApplePay and Android Pay will offer, this will in time force them to move into other financial areas, such as savings and other.

Apple, Google, Facebook and many other will also want a piece of the very lucrative financial markets.

Could payments just be the disruptive starting point? Following platform envelopment theory, existing players such as VIPP, SWIPP and MobilePay will have to add features to their platforms to survive an envelopment attack from Apple/Google and following disruptive innovation theory, we will see a disruptive move up market from these actors. Remember, Apple’s cash reverse is $, why should Apple not start to lend out some of their cash to consumers via consumer-loans? Consumers are already using the application to buy their goods in stores with!

The following graphs, shows how these large platforms could evolve over time, joining together with the power of platform envelopment, what defensive moves does the established financial sector have? Remember:

“There is one thing which is certain in the payment industry and that is that we are going to see a race towards zero in transaction fees” –

So why should Apple/Google/Facebook/SWIPP/MobilePay stay in the payment market, when we know that there will not be any profits in the future? If you follow disruptive innovation theory, it is because it is a starting point to offer more financial attractive products! To see how attractive the quick-loan market have become, visit my other post!

What do you think? Would you add cash to “Facebook/Apple/Android savings” in return for example an risk-free interest rate of 5%? Or, take a loan via your mobile payment application? And will we see an exponential disruptive evolution of the banking sector?

In my next post I will graphically show a potential evolution of payment applications! If you want more insights, you can hear my presentation November 25 at CAC Academy and ComputerWorlds Conference at Deloitte in Copenhagen, contact me for more info.