Incumbent Businesses Adapting To Take On Big Tech
Thomas Cook diversifies into mobile banking
Exemplifying the kind of strategy many businesses may soon adopt to survive, Thomas Cook has branched out into the financial services market. In a move that may help the company to stand up to the power of big tech, Thomas Cook Money was formed. It has recently joined forces with Finnish fintech Ferratum Group to offer banking services to its customers.
According to the Office for National Statistics, UK citizens’ spending abroad continued to grow in 2016, with those on holiday spending the most – a massive £30.1 billion. Although Thomas Cook has always offered currency exchange and money transfer services to its customers, it was yet to tap into the world of mobile banking. With mobile phone apps fast becoming the UK’s number one way to bank, this is a sector the holiday operator could ill afford to ignore.
Sumo, the “first ever” mobile banking app for holidays
Currently available in Sweden and set to launch across more markets in 2018, Sumo is a mobile banking service exclusively designed for holiday travel. By setting up a fee free account with the service, customers receive an intelligent contactless debit card that is capable of handling multiple currencies. When a payment is made at a Point Of Sale (POS), the card automatically identifies the local currency, enabling fee free payments in foreign currencies and foreign cash withdrawals without any additional charges. Currently supporting seven currencies, the account allows four fee free ATM withdrawals per month, including in the UK.
In addition to its service of currency conversion, Sumo also offers savings accounts to help people manage the financial impact of taking a holiday. Recognising that a holiday is often the biggest spend of the year for households, the app helps customers institute a weekly or monthly savings plan. Cleverly, when the target savings figure has been reached users are invited to click through to the Thomas Cook holiday booking system – making the app not only a useful tool for consumers, but helping to channel internet traffic back into the main company.
This example of expansion into new markets is just one of the ways incumbent businesses are adapting to the changes brought on by technology. As big tech companies such as Amazon and Google branch out into ever more diverse areas, they are treading on the toes of conventional firms. Thomas Cook Money’s decision to make their Sumo app a platform service, linking back to their core holiday business, is a great example of how incumbents can diversify whilst supporting their main business functions.
Whilst the advance of tech is forcing the hand of many legacy businesses, diversification done right is likely to benefit them in the long run. It is of note that established companies hold one major advantage over their tech counterparts: they have the trust and loyalty of their customers. This is crucial when trying to attract existing clients to products and services based around new technology. If an incumbent business such as Thomas Cook brings out a new tech product, their customers will be likely to give it a go. This contrasts with the problems in early adoption often faced by newer tech companies, who can struggle to attract mainstream consumers.
With developments in technology forever increasing the pace of change, it is vital that conventional businesses stay ahead of changing markets and consumer expectations. Done well, diversification into tech services can offer a host of opportunities for incumbents to increase their client base and strengthen customer loyalty. 2018 will serve as a test not only for Thomas Cook Money, but for many other businesses as well.
Will Thomas Cook Money’s Sumo app be a success? What are the challenges of diversification into tech services? How has your business adapted to the rise of technology? Comment below with your thoughts and opinions.