Data Storage: The Way Forward for Banks?

In the couple of weeks since Santander’s chairman, Ana Botín, told the Financial Times that Santander has plans to lease out its datacenter facilities to corporate customers, I have been struggling to think of a precedent. By Lawrence Freeborn, Senior Research Analyst, IDC Financial Insights

After years in which the discussion has been about how banks are bound to be displaced by tech companies, here is a rare example of the opposite happening, or at least the opposite possibility being held out by one prominent lender. “As I think how I am going to compete with all these new technology players, I can offer the same services as some of these big guys,” Botín told the FT.

This does seem like a genuinely new departure for a global bank, and every example of financial institutions providing digital storage so far has been in the consumer rather than business banking space. Although Santander itself hasn’t tried this, a few banks have offered online cloud storage a la Dropbox or Google Drive for a couple of years.

This has corresponded with banks scaling back their provision of actual physical storage to customers, with the likes of HSBC, Lloyds, and TSB having dropped their safe box products for new customers, while Barclays now provides only storage of paper documents in wallets, instead of safe boxes as in the past.

So offering online storage instead may go some way to replacing the physical vaults of old, and as such can just be seen as a sign of the times.

Here in the U.K., Barclays launched its version of this service, called Cloud It, in late 2013. Hosted by Barclays, this offers personal and business customers a cloud storage service for any documents they choose to upload.

Although Santander probably feels it has little to lose, having already made the investment in its new datacenter, it’s hard to imagine that banks will really be able to compete head on with the giants of the datacenter business. Bundling other types of service, like insurance, is a much more obvious fit. The biggest criticism to make is that Santander should make sure it can walk before it can run. There are plenty of things higher on the wish lists of corporates than datacenter storage.

“IDC believes that focusing on delivering core offerings well and innovating in banking offerings rather than moving into essentially unrelated services, should always be the guiding principle of any bank. This is the surest way to ensure that a bank can protect its business from the tech companies that are looking to move into banking: much better than trying to move the other way. Having said this, at least it shows Santander is thinking creatively about sweating its assets” said Lawrence Freeborn, Senior Research Analyst, IDC Financial Insights.

To get in touch with Lawrence: @IDCLawrence

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