Banking through Social Media June 2013
Social Banking Today, almost all global banks, be it JP Morgan Chase or Bank of America, are using social media for customer service and customer engagements. Few years back, none of the banks would have thought that social media will play a vital role in their business strategy. However, when corporate bodies started to believe in the power of social media, they found new avenues for customer service/interaction waiting for them, which include branding by engaging customers on Facebook, developing new products by crowd-sourcing and selling goods/coupons on social platforms. Years back, banks would not have considered internet for banking, social media for customer care and mobiles for money transactions. Today, these platforms are proving to be game changers for them. Can you imagine a bank without internet banking, mobile banking or a social media presence? And, even if you get one, what would be your reaction – Does this bank use technology? Will this bank deliver services on time? Are its employees as irritating and arrogant as they were few decades back? Should I avail services from such banks? Your answer will be ‘No… I should not’. For social banking, banks face the same dilemma they had while adopting internet banking decades back. First, let us understand the concept of social banking. We refer social banking to any banking transactions that are made using a social media platform. It is a step ahead of customer service on Facebook or Twitter. For example, you can login to your banking account using Facebook’s login credentials without leaving the Facebook interface. You can check your accounts, place service requests such as request for debit cards, pay utility bills or send money to your Facebook friends. In a nutshell, you will be able to execute low-value transactions on a social media platform. However, banks are not willing to accept prospects of social banking. They believe that social media (e.g., Facebook) is a conversational media, and not a banking channel. People use Facebook to interact with friends, share photographs and do some non-serious stuff, but definitely not for serious transactional banking. Banks’ perception is obviously not baseless; there are many challenges in the social banking space. The most serious concern is data security and privacy – who will take accountability, will it be Facebook or banks? The second challenge could be technology to link to the banks’ main data ware. Third could be regulatory compliance, and fourth, economic viability. But, didn’t the banks face similar challenges when they were adopting internet banking? Of course, they did. So it is not a matter of challenges, but of a vision – banks’ way of viewing Facebook. Today, their apprehensiveness about adopting Facebook as a banking channel justifies their vision, but tomorrow it may not. In March 2013, Facebook had 1.1 billion monthly active users or 15-16% of the world population. If you see its penetration in developed economies, you may find the figure impressive (refer the chart below). The US, the UK and Australia have more than 50% active Facebook users. Given the situation, shouldn’t banks provide services where their younger customers spend most of their time? The answer should be, yes.
Banking Through Social Media
2|Confidential
Monthly Active Users (MAUs)
681
738
183
800
845
207 225
901 245
955 268
1,007
1,056
Facebook Penetration 1,110
70%
288 304
327
298 319 255 277 212 234 196 156 174 246 253 261 269 201 212 221 229 239 161
Europe
Asia
Q1'13
Q4'12
Q3'12
Q2'12
Q1'12
Q4'11
Q3'11
Q2'11
Q1'11
163 169 176 179 183 186 189 193 195
US & Canada
80%
Rest of World
Source: Facebook
60%
52.9%
52.7%
53.1%
50% 40% 30% 20% 10%
5.2%
3.9%
India
Nigeria
0% United States
Canada Australia
Note: China penetration rate is 0.0%
Several leading banks in the world have already acknowledged it. ICICI Bank, the second-largest Indian bank by market share, has launched Facebook App through which its customers can do some basic transactions. Commonwealth Bank of Australia, ING Direct Bank of Canada, GT Bank of Africa and FNB Bank of South Africa are among the banks that think Facebook has the potential to become a banking channel for transactions. The summary of services provided by these banks is given below. Banks
Facebook App
ING Direct Canada
Orange Snapshoot
ICICI Bank
Your Bank Account
Commonwealth Bank
Kaching App
GT Bank
GT Bank
Functionality Chatting with Facebook friends View bank account View transaction history Receive account notification View account details Mini statements Application for debit cards and request for check books Make payments to Facebook events Gift payments to friends and family View account balance, transaction history Transfer funds between two accounts View peer-to-peer payment and request history Transfer money Purchase airtime Pay bills Check account balance
When the world is reaching the tipping point of smartphone adoption and internet penetration is bound to go up, the importance of social media is hard to ignore. Facebook is already providing ecommerce to its users, and thus using it as a banking channel will not be a daunting task. If the banks like ICICI and Commonwealth can address security concerns, so can others. Regulations will evolve and will take their own time. But what is certain is that the banks have to provide service frictionless to their customers where they spend more time. Be it Facebook App or any other channel, they have to be present at each and every platform of the digitally connected era.
Banking Through Social Media
3|Confidential