Hard Questions on Hardware

Should financial services institutions look to ‘phablets’ as their next major technology opportunity?

If banks are already knee-deep in the technology business—think of all the mobile apps they develop and market, the ongoing initiatives to enhance their presence within social channels, the efforts to innovate with the networks infrastructure—what comes next?

Try hardware. In fact, try a particular hardware category: phablets.

First, it might help to step back for a minute and cast a wide net in looking for inspiration. And in that search, consider Pepsi.

It turns out that the soda giant is getting into the Android phone business.  Actually, it’s licensing the brand to a Chinese manufacturer named Koobee. The new device is likely not particularly different the Octa-Core MediaTek MT6592 processor, and offers 16GB internal storage, 2GB RAM and backside touch fingerprint sensor. Beyond the novelty factor, not much of the device is particularly cutting-edge or even new. Still, there are some aspects that have caught attention.

First, Koobee (and by extension Pepsi) chose to go the crowdfunding route. It’s drawn plenty of derision—the idea of a multinational conglomerate asking for donations sounds ludicrous, even if it’s not directly doing the asking. But clearly, Pepsi understands the value of gaining a constant presence with target consumers. The phone is now such an extension of each individual’s personality, the most personal of personal computers, that having a brand association with it that goes beyond the manufacturer or carrier is a potentially huge advantage.

What’s also curious is that the new device is being billed as a ‘phablet.’

This is an area we’ve covered on this blog before. The term is surely groan-inducing, but the thinking behind it may have some relevance.  Basically, over time, tablets have gotten smaller while phones have gotten larger. It’s hard to define exactly what, if any, the boundaries of such a category would be, and which current products already fit the bill. More broadly, the term hasn’t gained much traction even in an environment thick with digital-speak.

In other words, the field is wide open for given brands to occupy. And those brands don’t have to come from the phone manufacturer or carrier worlds.

First, it’s important to note that there are many, many smartphone models available from companies not named Apple or even Samsung.  For example, the Moto X 2nd Gen has generated very positive feedback, the Google Nexus 6P is earning rave reviews and the LG Ray is even being billed as a midrange phablet (which means this non-category is getting its own sub-categories). Even a basic search of the news unveils a veritable flood of products in this field, many from companies with big budgets.

And as far back as spring of 2013, a comprehensive research effort reported that the compound annual growth rate (CAGR) of the ‘phablet and superphone’ market (again, groaning understandable) would experience a compound annual growth rate (CAGR) of 44.1% from 2012 to 2018.

So here’s an interesting question: Are we reaching a point where smartphones and tablets will become such an affordable commodity that they will represent an opportunity? While some consumers, particularly the early adopter types, will always want the latest and greatest releases, is there vast potential market of consumers and professionals who will gladly use a phone or tablet that comes to them as part of a larger packet of offerings from their favorite supplier in an entirely different category? (This already happens in other industries—while adhering to regulations, medical professionals use devices that come with a particular supplier’s brand.)

Again, the only reason to single out phablets in this market is that there really isn’t even a market yet—there’s the term, a whole lot of products and not much else. Besides, we could argue that phones are too small for complex financial analyses, while tablets are too big to carry outside the pocket. The phablet represents a mid-point.

So is there an opportunity for financial services providers to offer co-branded ‘phablets’ with a boatload of custom apps to accountants, tax preparers and even select consumers who conduct a certain amount of business with that institution? Is that a good way to lure more financial services professionals to drive their clients’ business to the bank? Is what Pepsi is doing today become what your bank is doing tomorrow, only with a more select clientele?

We don’t yet know if phablets will even become a mainstream category—in fact, that will likely happen only if cutting-edge code writers can thread the needle and develop apps and capabilities that dovetail perfectly with this form factor. What we do know is that technology is integral to our industry, and software may be only part of the equation. Hardware may just be the next frontier.

Written by Jack Dougal