stgilesresident on digital banking!

Biometrics and banking

The death of YourBank.com?

Bank services via Boo? Retail banks and the use of audio micro-blogs.

Getting to know you. Getting to know all about you.

Is it wrong for your bank to use your social graph - the personal data you generate within your various social media outpourings - to make decisions about you? Much as in the famous song from ‘The King & I’, banks hope that once they’ve got to know you, you’ll get to like them too. But it doesn’t end there. Social graph data can enable banks do much more besides. So, should banks be using this data?

Well - as with so many of these question - the answer is ‘yes’ and ‘no’ and ‘it depends’.

Banks need to tread carefully here. Research shows that younger customers are very happy to share their data with anyone (as Mark Zuckerberg said in 2010, ‘Privacy is dead’). But young customers tend not to be valuable customer and many older folks (above the ancient age of 30) are a lot more twitchy about their data. When we place our personal data into Facebook, Twitter and the like, we seldom pause to wonder if we are going to be assessed by the powers that be. Most social media is an unofficial and semi-private part of our lives that we share with a network of known and trusted contacts. So you may have clicked to follow your bank. You probably didn’t read the small print and have no idea that your off the cuff status updates, old college friends and list of random things you’ve liked may now have a material impact on how you are treated or your loan score. Having these factors used by a bank without your knowledge would feel intrusive and thus be unwanted. Research has showed that the safe keeping of personal data is one of the few areas where banks are still trusted by customers. Banks cannot afford to damage that trust in the current environment as the reputational and regulatory backlash would probably be severe.

With this huge risk, why would banks even consider using this data? Let me lay my cards on the table. I believe social graph data is the key to offering customers some really superb customer service. Just imagine, by checking your social graph data, your bank determines you have a deep passion for travel and they offer you a good rate on a credit card that offers AirMiles. Alternatively, your bank spots that you have uploaded a photo gallery called ‘my new car’ and offers you a great motor insurance deal. In both these situations - one driven by long held preferences and the other by a life event, a bank has the capacity to tailor its marketing to a segment of one. As long as this is done in a way that doesn’t feel creepy (so it needs to be transparent what data is used and why), I think this starts banks down a journey of building meaningful relationships with customers via social media. This is a good thing. American Express (as I have mentioned before) do this really well with the ‘Link, Like, Love’ functionality on their Facebook page in the US. They offer customers vouchers based on the things they or they friends have liked on Facebook.

Lenddo (www.lenddo.com), a start-up from the Philippines, also shows how much more can be done with social graph data. Lenddo evaluates a customer’s credit worthiness based on the strength and integrity of their social network. Lenddo assesses a customer’s reputation based on who their friends and family are - and how many people have trusted them to become a contact. Lenddo treats their friends and family as a form of collateral. If the customer fails to repay their loan, their credit score - and the scores of all their contacts could be reduced. In this way, a large group of people have an interest in making sure loans are repaid on time. So you can imagine a scenario in the UK. You’ve been turned down for a loan. Your bank offers you the chance for a revised decision, if you allow it to crawl your social graph data. It determines that you have wealthy and well connected friends who have been willing to vouch for you. Based on that data, your bank may reconsider, and decide to give you the loan.

So to conclude, I think it is a good idea for banks to use social graph data - but only in very clear scenarios. The use of any social graph data must be in the best interest of both the bank and the customer. Any use of social graph data must be transparent to customers - and those customers must feel in control of their data. To try an use social graph data on the sly will provoke a significant backlash - which in the current environment, banks would be wise to avoid.

If you are aware of other examples of social graph data being used by financial services companies - I’d love to hear from you!

I’m here to make social media boring

Over the last couple of months, I have presented to a lot of senior banking executives on the subject of social media. The parallels between these presentations have been fascinating.

At all these presentations, I tend to be the last presenter of the day. I am usually all that’s between 10 tired delegates and their commute home. Nevertheless the feedback I usually get afterwards is how exciting the discussion has been and how valuable it was to have an opportunity to discuss what social media can do for a bank.

Now, I would like to put this down to my own inimitable presenting style and effective influencing skills (and the fact my presentation often follows a long discussion on Basle 3 capital adequacy requirements or the impact of new regulatory frameworks - after which anything would be exciting). However, I suspect is it more to do with the way in which most bankers perceive ‘social media’. Social media is ‘fun’ and ‘cool’ and ‘interesting’. It’s is a nice way to round out a day of presentations. A tick in the box for strategic thinking. But, well… it’s just not that important right now.

I think that is really wrong. I want social media to be recognised for what it is (and increasingly will be): ‘integral’ and ‘important’ and ‘serious’.So I’m now here to make social media boring. I want people to groan at the thought of a social media presentation. Ok - maybe that takes it too far… But social media has to be placed in the mainstream of banking.

I want for bankers to see social media as an integral part of everything they do. Cutting the cost of customer administration? Enhancing sales? Reducing cycle times for product development? Building deep customer relationships? Social media is a fundamental part of the solution to these questions - and to many other serious challenges facing the banking industry today. Banks need to stop thinking of social media as existing within a bubble and integrate it to their business models. It needs to be treated in the same way risk management, customer satisfaction, staff training, etc., etc. 

Social media needs to be a factor in every decision because it has the capacity to drive tangible and significant benefits across the banking business model. So banks not only need to understand how social media fits across many aspects of their businesses - but also the importance of social media. Social media is a proven way to drive significant benefits by increasing income, cutting costs, improving retention and satisfaction and enabling innovation (internally and externally). The scale of the kinds of benefits that can be achieved is growing as organisations (from across many industries) develop and extend their social media schemes.

Once social media stops being exciting or gimmicky, banks will start to leverage the full opportunities that it presents. Social media has to be serious so that it becomes credible within a financial services organisation. Senior people need to buy in and spread that engagement through their teams. Social media cannot simply be the preserve of young digital managers or enthusiatic external recruits from beyond banking.

So for these reasons, I hope that we can all do our best to make social media as boring as possible - because once this happens, the banking industry will truly be able to deliver on the opportunities social media offers.

[Thanks to Justin Ablett for inspiring this topic.]

The ten year time-warp: Internet Banking for business

I think we can all agree that internet banking has proved itself to be a BIG thing! And yet, banks seem to be way off the pace in terms of quality of service and functionality provided to corporate and business customers online. In fact, I would say that internet banking for business is in a ten year time warp. It feels similar to where retail banks were back in 2000 – when they were still trying to understand what customers would do online and figure out if they could make money from that new-fangled ‘inter-web’.

It’s strange, really. These are the business accounts that are worth hundreds of millions – you would think banks would be lavishing money on them. However, business and corporate banking has remained a largely person to person relationship business. Internet banking has been a hygiene factor rather than a differentiator. This is especially as, by and large, it is small business people or junior finance clerks who most regularly use online services.

But I think this is all about to change – and for a few good reasons (and this list is not exhaustive):

1)      Banks are waking up to the fact they can save money:

a.       The cost of a person to person service is growing. As relationship managers have to care for larger and larger portfolios of customers, banks will have to beef up their online offerings to compensate

b.      Collaborative working tools will give banks the ability to work more efficiently with clients – which will save banks money and save customers time. For example, web-chat built in to internet banking will allow banks to share information with customers in real time – answering questions in one touch.

2)      It is becoming apparent that internet banking can differentiate service and  deepen relationships:

a.       Banks will be able to provide new functionality as a value add – particularly for top end users. By adding quality reporting functionality to online services and making it accessible via mobile / tablet devices, banks can deepen relationships with CFOs

b.      By offering broader ranges of functionality and more user friendly processes, banks will be able to help their business clients to save time and cut costs – particularly important in the current environment

3)      Customer expectations have grown. Online customer experience leaders like Apple and Amazon – as well as retail internet banks – have raised the bar. Customers are already becoming frustrated that they cannot do the things they expect to be standard.

I recent co-authored a white paper on the future of internet banking for businesses – spanning both the corporate and SME markets. (http://bit.ly/sq3362)  As part of that process, I spent time reviewing all the major business internet banks and talking to users – both small business owners and corporate users. This conclusively confirmed that users want a better service.

Users want banks to get the basics right – which many do not do today. Users want their internet bank to provide a decent user interface - with simple to follow processes, a convenient log in process and proper multi-signature functionality. SME customers want access to a greater range of functionality. Corporate customers want more configurability – and to be able to fulfil their foreign exchange and money market transactions for themselves. However to truly differentiate themselves, I think banks need to look to the future – to the services that customers don’t even know that they need yet – or that banks are too scared to offer (online corporate lending anyone?). As all the banks bring their online services up to the standard of retail banks, that is where I think the true differentiation will lie.

So internet banking for business is in a ten year time warp – but it is starting to fast forward. There are clear areas for immediate improvement (banks need to get the basics right) – but differentiation will be achieved through innovation. Banks need to move now, before they get left behind by their competitors and their customers.

So, what do you think? Do you agree? Drop me a comment now and give me your opinion…

Knocking the Froth off Social Media

Social media has exploded across the financial services industry. And like many a new craze before it, it has largely been driven by the perceived need to do something, compounded by a lack of industry consensus around what that something should be. Initiatives have been launched without clear objectives. They are not targeted at specific customer needs. Measures of success have not been identified or tracked. Long term strategies are not mapped out. To cap it all, I’ve even heard the worst harbinger of doom uttered from the lips of bankers. “Don’t worry about the RoI or NPV. We just need to launch something – and fast.” If ever there was a warning sign – it was that. Social media has become frothy.

This really matters, because social media needs to be taken seriously. In a world where customers spend more time online and visit branches less and less, social media sites represent the best opportunity for banks to maintain their relationships with customers. Frothiness will deter the more cynical members of the banking fraternity from believing in the potential of social media to drive value. And worse, it will distract bankers from really focusing on the hard questions of how they can drive value from social media for customers and banks.

The froth needs to be knocked off social media – and quickly!

So how can we measure the value of social media? I think there are a number of different ways – these are just a few examples:

1. Sales benefits: As well as simple measurements like click through rates and click to sale rates, more advanced measurements are being developed. Software vendors have developed tools which enable social media managers in banks to track which users have ‘liked’ their content – and also track how many people in that original user’s social network have also clicked ‘like’. These users can then be tracked through to purchase. This means content can be targeted to users – and the most influential users can also be targeted. This can be converted into a proper £ or $ figure.
2. Cost reduction: This is something that the telecoms industry has done really well. By getting customers to answer each others’ questions online, call volumes can be reduced. The numbers of questions answered online can be correlated with the number of calls received, and again this can be converted into a proper £ or $ figure.
3. Marketing benefits: Companies can learn from the social graph (that’s the information companies can get about a user from what they do on a social media site – who do they like, what do they like, etc) of their online users. American Express have done this really well in the US with their ‘Link, Like, Love’ promotion – where customers are given discounts for products that they or their friends have ‘liked’. Utilisation rates for these kinds of offers and the value of improved customer retention can be used as measure of success. Social graph data can also be used to refine marketing models and customer segments – which can be used to improve sales conversion across a whole bank.

Where banks fails to build a compelling benefit case, social media initiatives will quickly drop off the radar. This is well illustrated by the fact that many of the social media accounts set up by financial services companies are now inactive. This is a big mistake. However, until banks figure out how to apply the old maxim of ‘if it can’t be measured, it can’t be managed’ to social media initiatives, then banks will fail to exploit this enormous opportunity to build lasting, meaningful relationships with customers.

Why banks should care about Quora…

For those of who you who have yet to stumble over it, www.Quora.com is a question and answer website that launched back at the end of 2009. It is probably the highest profile of a number of Q&A websites (like www.Askville.com) that have launched over the last couple of years. In good ‘nu-digital bubble’ fashion, it is already estimated to be worth around $1bn.

Answers to questions are crowdsourced from other users - and the best answers are voted for - which pushes them up the ratings. The service is growing in popularity - the most popular question has had almost 250,000 views.

To me, the popularity of these Q&A sites for financial services questions is quite telling, for a couple of reasons. First, it shows that customers have lots of questions that they want to have answered - which isn’t really surprising considering the upheavals of the last couple of years.

Second - and rather more worryingly for financial services companies - it demonstrates that customers are willing to trust strangers, with no particular knowledge of financial services, over and above well known financial services brands. This may also reflect the lessening of trust in banks, in particular.

A quick dip into Quora reveals a fascinating range of questions. Look up Banking and you get questions like ‘How does my Barclays PINSentry device work?’ through to ‘What areas of banking should I work in to develop my career.’ Looking up a more product focussed forum - such as Credit Cards, and you get ‘Which no-fee credit cards have the best customer service + decent cash reward?’ and ‘Why do itemized credit card statements only show business abbreviations …, as opposed to full names and robust receipt information?’

I think these are the kinds of conversations banks should be very interested in. There are already examples of where financial services companies are trying to get involved.

http://www.quora.com/Is-the-Visa-Black-Card-worth-its-annual-fee-of-495

I don’t think this is a very effective attempt by Visa. Just dropping an ad link in after a question about value for money is hardly going to be effective.

So, if the corporate response approach doesn’t work, should financial services companies even try to answer questions on sites like Quora. I say yes. Especially because as time goes by, I think these sites will strengthen. Contributers are becoming less like strangers. Quora actively discourages anonymous profiles. Services like www.Klout.com provide a measure a contributors online influence - and by extension offer a guide to how reliable a contributor is - and as I mentioned before, if users don’t like a response, they can just vote it down.

And herein lies the answer for banks. Be less anonymous - and be more real. Allow experienced staff to represent their bank on Quora - but in an independent fashion. Let them be the human face of their company. Trust them to do it right. Let them develop thier own personas, followings and Klout ratings. Then customers may start to see financial services companies less like grey monoliths and more like groups of real people they can trust.

Can being social save retail banking…?

Here is my hypothesis. In the future, customers won’t need to engage with their banks on a person to person level. I think that could be very, very bad news for retail banks.

Most people will already attest to the fact that they visit bank branches less and less. Banks have responded - and I suspect will continue to do so - by shutting up shop. RBS is closing 80 branches this year, HSBC closed 58 branches last year (http://www.thisismoney.co.uk/money/meandmymoney/article-2030790/HSBC-branch-closure-nail-Ongar-s-coffin.html). You might think this is great news for banks. They are maintaining sales and reducing overheads. Woo-hoo! But I argue that this leaves them dangerously exposed.

In the past, we customers had personal relationships with branch staff. Even if you ddn’t know their names, if you needed to, you could go into a branch and speak to someone face to face and decide if you trusted them. And this brings me to the key theme that runs throughout this particular issue - TRUST.

This is all really bad timing for banks. Two trends are converging. First everyone hates banks. Second, everyone wants to nibble away at the banking market.

As we are all aware, customers have lost a great deal of trust in banks (as I’ve said before, just google the word ‘occupy’). This is compounded by the loss of person to person engagement with bank staff - where a lot of customer trust used to be built. So we end up with a world where customers do pretty much all their banking online and have a poor opinion of banks. At the same time regulation will constrain the banking industry yet further and banking services will become more commoditised. 

At the same time, new players are emerging and innovating in services and products. You have new online banks providing better experiences - like BankSimple. There are aggressive new payments players - such as Google and Paypal. There are product innovators like Smartypig, Bobber or Zopa. In a commoditised market, they will all start to eat away at the banks’ market share.

So what can banks do about this? They need to focus on their relationships with customers once more. I was really scared the other day when I read a quote from a senior exec at Citi. He said thin margins mean banks can’t make all customers feel special. I disagree entirely. Banks have amazing data on their customers. They can plug it into social media and fill that gap.

It’s all about trust. And where does trust come from? I believe trust comes from feeling your bank knows who you are and will do the right thing for you based on that knowledge. In the past, that could be the bank manager phoning you up if you were close to your limits - or advising you where to put your savings to get the best return. These things make you trust your bank.

By creating a relationship with a customer through social media, banks engage in an environment of the customer’s choosing. The banks can use transactional data and social graph data to tailor content, marketing or advice to segments of one. They can make all customers feel special.  As customers see their banks using data to be proactively helpful - trust will be rebuilt and relationships renewed.

So by being more social, I believe banks will be able protect and grow their existing franchises.

Why banks - and the rest of us - should be grateful for Movenbank & BankSimple

Don’t get me wrong. I love Gizmodo. However, since I read their review of Movenbank, Brett King’s new Internet Banking entrant - I’ve been feeling thoughtful. Here’s a link to it: http://gizmodo.com/5846051/the-internet-bank-of-the-future-is-stupid-and-useless. It involved some colourful descriptions - I admit, the word ‘shitdrivel’ was a new one on me! But I think their review fundamentally missed the point. I think customers and competitors should be deeply grateful to these new entrants.

I think Movenbank and BankSimple are addressing, head on, two key challenges in the banking industry.

1. People don’t like banks.

This doesn’t need much explaining. Google the word ‘Occupy’. But here are two players trying to create banks who aren’t like other banks. The existing players should pay attention and learn.

2. Banks aren’t innovating fast enough.

Customers needs are evolving. Banks aren’t keeping up and as a result are being sliced like salami by new entrants who focus on specific areas. These new entrants meet those customer needs with innovative solutions. Google and Amazon’s activity in the payments space is a good example. The new entrants are trying to meet these new customer needs.

So, do I think that Movenbank and BankSimple will become globe straddling superbanks? Maybe - although history suggests probably not. (However, I suspect Brett King and Joshua Reich - CEO of BankSimple - are plenty smart enough to make sure they get their money back, and then some!) Are they mainstream propositions that my mum would want to use today? Heck no. But the point is that 20 years ago my mum didn’t want to use an ATM either. 10 years ago she wouldn’t use internet banking. Now she is an avid user of both.

Are Movenbank and BankSimple the final destination in the evolution of banking. Heck no. But they are signposting the way to the immediate future.

The point is, we should be grateful that they are shaking up the system. In the UK market, most of the challenger brands were gobbled up after the credit crisis. The one new bank - MetroBank, has gone down a very traditional, branch-centric route. This has left a gap in the industry for innovation. The banks who are left aren’t really worrying about customers - they’d probably be happy to lose a few. Instead they’re more worried about capital adequacy and regulatory frameworks.

Banks need challengers to stay competitive. If BankSimple and Movenbank can prove customers want new functionality and better, more transparent service - I believe we will see some rapid innovation from the big players. I suspect this may already have been one of the drivers in Citi’s recent lurch toward social media. If that is the case, these new entrants will have been good for everyone.