The recent furor over Wall Street’s handling of Facebook masks a deeper issue – banking’s almost paranoid discomfort with social networking. The cultures couldn’t be more extreme. While capital markets favor opaqueness, social networking is all about transparency. Surely any bank’s nightmare would be to have its trading strategy posted on Facebook.
Yet it is the very transparency of the internet and the information society it is spawning that is transferring power from banks to their customers. In today’s always interconnected world of unlimited newsbites customers often know more about their banks than banks know about them.
In our down market there has been a shift in banking towards customer intimacy and away from complex products. What’s the point of a synthetic derivative if no one wants it? This represents a 180 degree transformation in the industry’s technology focus at a time when budgets are really tight.
Ironically it is the internet and its related technologies, the tools that have put banks so much on the defensive, that offer a solution. The debate about whether social is better for branding or advertising misses the point. It’s one of the tools that help banks build deeper relationships with customers.
Thanks to the internet of things, an ecosystem of connected devices and applications, we are generating more data about ourselves than at any time in history. Every time we put our photos in the cloud, check in on a social networking site or trawl websites we leave behind digital clues as to who we really are, what relationships we have and lifestyle choices we make.
We are creating a treasure chest of information which, when combined with what banks already know about us, offers huge insight into us as individuals.
Add to this mix the power of analytics and banks can predict with increasing certainty how we will respond to individual campaigns. Instead of receiving blanket offers we may have little use for we can start to receive relevant ones that may actually improve our lives. Even in as basic an area as communications, content can be personalized to our individual needs.
Does the customer want their statement electronically or in paper form? How frequently do they want those statements? Are they interested in savings products or borrowings? Are they about to change jobs or start a new business? Imagine being able to make relevant offers timed to lifestyle events.
In the old world of spray and prey marketing banks spend billions of dollars a year in postage alone and achieve little in terms of customer satisfaction, retention or even growth in customer relationships.
It is time for banks to overcome their fear of social, embrace the new world of market transparency and recognize the new opportunities they have been offered on a plate. Once banks do this perhaps then they will appreciate the real value of Facebook.